Productivity gains on health needed to avoid budget black hole

As millennials get squeezed by dim economic prospects and rising healthcare costs, the need for better health services is becoming clear

by Leo Almazora

A group of noted academics and decision makers have stated that unless there is a major change in the way healthcare is delivered, millennials won’t be able to pay for baby boomers’ treatment.

Addressing the issue in the Globe and Mail were former federal deputy minister of health, David Dodge; Brian Golden of the Rotman School of Management; Sandra Rotman of the University of Toronto and the University Health Network; and Tiff Macklem of the Rotman School of Management.

Together, they identified the double squeeze that millennials will experience in the coming years as reason for concern. With the Canadian economy projected to grow by only 1.5 per cent over the next two decades and real healthcare spending set to increase by 3.5 per cent a year, huge budget shortfalls will become commonplace.

Ignoring this problem will likely put enormous pressure on millennials, to the point that they may refuse to accept the financial burden of caring for aging boomers. The best solution is to improve the productivity of the Canadian economy and of the healthcare system in particular, the experts noted.
Improving overall productivity is a challenge, however, as policy levers to induce that kind of change have proven elusive. Therefore, the focus has to be on improving healthcare productivity.

“Compared to the United States, our health-care system is on average more equitable, less costly and more likely to deliver better health outcomes. This is a source of pride for Canadians. But when we compare our provincial systems to those of many other developed countries [such as Britain, Australia, and the Netherlands], ours deliver less and cost more,” the experts said.

Other recommendations were included: Productivity can be increased to create greater competition among providers; caregivers and organizations may be incentivized by a rewards system wherein the government allocates more money to providers that give more value to citizens; and while provinces are already creating incentives for Canadian hospitals to innovate, increase efficiency, and improve outcomes, more is needed.

Canadian providers may take a page from the playbooks of European public systems and US HMOs by considering bundled reimbursement. Essentially, hospitals are entitled to collect a fixed fee for a bundle of services, depending on outcomes. Providers that deliver quality care and outcomes will be entitled to a specific dollar amount for a specified procedure or treatment, which would go to labor, operating room time, equipment costs, and other expenses. Those that can find ways to provide quality care for less than the set price can enjoy a profit margin.

There are many other possible avenues to explore, of course. And with millennial incomes projected to remain practically stagnant over the foreseeable future, it’s important to embark on this exploration as quickly as possible.

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Canadian medical costs to surge past inflation rate