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How can pressures on public finances be contained?
Demographic pressures will also weigh on public finances, although deferred taxes on private pension payments will provide some offset and the CPP/QPP are on sustainable paths, unlike in most other OECD countries. Nevertheless, public debt needs to be reduced to make room for future pressures, and the main forces driving up public expenditures, most notably health care, need to be contained. In the 2004 budget, the federal government not only re affirmed its commitment to budget balance or better but also introduced an objective to reduce federal debt to 25 per cent of GDP within 10 years. Both actions are welcome; indeed this blend of fiscal responsibility year by year and attention to longer term outcomes could be developed further. Federal and provincial governments should join together in adopting a long term fiscal sustainability framework covering all levels of government that could identify where pressures are likely to emerge and assess the long term implications of different policy options. An independent agency could be assigned the task of periodically assessing the situation to set it outside the political decision making process and enhance its credibility.
Federal and provincial budget balances and net debt
Per cent of GDP
1. Data before 1997-98 are not strictly comparable.
Source: Statistics Canada.
A comprehensive long term framework would also help Canadians to assess the costs involved in future increases in publicly funded health service standards and the trade offs in the form of higher tax liabilities and/or reduced non health public services. The public is very concerned about the current cost, quality and responsiveness of the health care system, but the validity of this disquiet is difficult to assess because of gaps in information. More intensive efforts are needed to upgrade financial management and information systems: detailed, activity based costing of services is essential to obtaining a comprehensive understanding of present strengths and weaknesses of the system as a whole, as well as the effectiveness of alternative treatments and the efficiency of different providers and institutions. It is also a pre requisite to ensuring that additional resources currently being pumped into health will be applied in the most effective areas and deliver commensurate increases in outputs.
Waiting times
1. Some data not provided due to extreme sampling variability or small sample size.
2. Interpret with caution (high sampling variability).
Source: Statistics Canada, Health Services Access Survey 2003.
Several adjustments to the institutional framework for managing health care could also deliver efficiency gains and provide stronger incentives to improve health outcomes:
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Extending the public health care system to provide coverage for home care and to put a cap on out of pocket expenditures on pharmaceuticals. This would lead to more appropriate use of hospital services by reducing present biases in clinical decisions due to differences in coverage.
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Increasing incentives for hospitals to enhance efficiency by modifying funding mechanisms, for example, by reimbursing hospital care on the basis of reimbursement rates established for each Diagnosis Related Group. This would facilitate more transparent, informed choices about health priorities and help in identifying where delivery could be improved.
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Using mixed payment methods more extensively for primary health care providers. Combining a salary or capitation component along with fees for services rendered could provide better incentives for doctors, encouraging them to provide care focused on long term health outcomes.
A laudable initiative is the Canada wide approach to establishing electronic patient records, which would help to provide a more integrated approach to health care, reaching across all points in the system.
Funding of health care has been a contentious issue, with provinces eager to persuade the federal government to contribute an increasing share. However, the scope to lobby continuously for extra federal funds reduces the pressure on provincial governments to get better value for money out of their own health spending. The September 2004 agreement between the federal government and the provinces sets out a 10 year plan for strengthening health care, accompanied by an additional C$41 billion in new federal funding. To achieve associated efficiency gains, these arrangements should be made impervious to any further renegotiation efforts over the 10 year period. They provide the provinces with a clear basis for long term planning and allow them to concentrate their efforts on delivering better results than achieved under the previous arrangements.
Return to the OECD Economic Survey - Canada 2004 homepage
A printer-friendly Policy Brief (in PDF format) may also be downloaded. The Policy Brief contains the executive summary and the OECD assessment and recommendations, but does not necessarily include all of the charts available from the above pages.
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The complete edition of the OECD Economic Survey for Canada is available from:
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SourceOECD for subscribing institutions and many libraries
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Olisnet, under "Publication Locator", for government officials with accounts ( subscribe)
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