It seems every provincial budget season in Alberta there are renewed calls from opposition parties and the media to rein in health care costs.
This year PC health critic Richard Starke quipped, “It’s still a pretty good slope, isn’t it?” in reference to the NDP’s often recited goal of “bending the cost curve.”
In mid-June 2015, the Calgary Herald editorial board responded to the first speech from the throne of the NDP’s mandate, writing, “A review of the province’s finances is welcomed, particularly around health care, where spending has ballooned and is arguably unsustainable.”
The editorial continued, “The dilemma, of course, is that climbing health-care costs pinch other priorities, such as the education system the NDP government identifies as critical to the province’s prosperity. From 1980-81 to 2013-14, spending on health soared, from consuming 18 per cent of all revenue to absorbing about 40 per cent. That’s meant that the amount of revenue dedicated to all other government spending, including education, has fallen from 82 per cent to about 60 per cent.”
This month's marking of the midway point of the NDP’s mandate provides an occasion to evaluate health care spending in Alberta under the NDP government compared to past PC governments, as well as the NDP’s approach to health care compared to the previous government's. Is the NDP managing health care costs better or worse than the PCs? How is the NDP’s approach to health care similar to or different from the PCs’ approach? Is education funding under the NDP being squeezed because of health care costs? Did health care funding actually soar under the PCs?
Let’s begin with the PCs to briefly analyze their record on health care and to provide a historical baseline for evaluating the NDP and comparing them to past Alberta governments.
Health care in Alberta under the PCs
In Alberta, overall public expenditure and public health care spending specifically have been low relative to the province’s gross domestic product (GDP) for decades. For example, when Ralph Klein became premier in 1992, he inherited “a tight ship” from previous premier Don Getty’s government. As Parkland Institute author Kevin Taft argued in his national bestselling book, Shredding the Public Interest: Ralph Klein and 25 Years of One-Party Government, “By 1992, there was plenty of information circulating within the Getty government that showed spending on most public services had dropped markedly from 1985 levels.”
Yet, Klein claimed at the time that public spending levels in the latter half of the 1980s and early 1990s were out of control.
In his book Taft used the chart below, “Program Expenditure Growth Since 1985-86,” to illustrate that “Alberta had the tightest controls on spending in Canada throughout the very period the Klein government has claimed costs were out of control. Alberta’s spending on public programs grew during this period at easily the lowest rate of all governments in Canada. If the graph had accounted for population growth and inflation it would have shown an actual decline in real spending.”
Taft then compared public spending on health care and other programs from 1981 to 1993, using the chart below, “Health Expenditures in Relation to Other Program Expenditures,” to directly contradict “the Klein government’s claim to skyrocketing health costs.”
So, during Getty’s tenure as premier from 1985 to 1992, health care spending was relatively steady, with a small decline from the 1987 peak. In direct contradiction to the Calgary Herald’s claim about supposed ballooning costs of public health care, Taft observed that “The reason health care spending takes a bigger piece of today’s budget is not because it has gone up, but because other programs have fallen so sharply.”
Adding to the shakiness of the Calgary Herald editorial board’s claims, the trend of public health care taking a larger portion of the provincial budget because of cuts to the rest of the public sector would continue during Klein’s tenure from 1992 to 2006. In fact, Klein reduced the size of the public sector from 22% of our provincial GDP to just 12%. In other words, Alberta’s public sector was reduced by 45% in comparison to the size of our overall economy.
When inflation and population growth are taken into account, Alberta’s health care spending under Klein grew only slightly, and actually declined as a proportion of GDP. As shown in the chart below, our provincial health care spending was 3.97% of GDP in 2006, down from 4.45% of GDP in 1990. This means that Alberta’s 2006 health care spending was even more affordable than its already-sustainable level in 1990.
Klein achieved this reduction in public health care relative to provincial GDP in part through his government’s substantial cuts to health care funding in the mid-1990s. Between 1994 and 1996, the Klein government cut public health care spending by 21%. These cuts were so large that Alberta’s total public and private health costs did not surpass its 1993 peak until 2001.
Total health care spending increased significantly in the decade following the deep cuts of 1994-96, but the cost increases of 1997-2007 were not because Klein reversed his position on public spending. As illustrated in the chart below, from the same Parkland report, spending in the “other” category was the main reason for the increase of overall health costs in Alberta. This significant increase in the “other” category was driven by inflated prescription drug costs caused by Prime Minister Mulroney’s decision to increase patent protection for drug companies from 7 to 20 years.
The public components of Alberta’s health care system, such as hospitals and emergency services, did not see significant cost increases from 1997 to 2007. In fact, hospital spending dropped dramatically under successive PC governments. Hospital spending as a proportion of overall public health care spending went from 44.7% in 1975 to 27.8% in 2009. The costs for pharmaceuticals doubled over the same period because of the changes to patent laws. In 2009, Parkland Institute called for increased attention to the dramatic increase in the price of pharmaceuticals, but the Tories instead cut surgeries and hospital beds.
In the last five years of their four-decade-long government, the PCs increased spending on health care, but those increases were needed to start to repair the damage done in the name of debt reduction under the Klein regime. Alberta had easily the most sustainable level of health care spending of all the Canadian provinces after Klein retired as premier. In 2007, Alberta’s total health care spending as a proportion of GDP was 7.3%. Saskatchewan had the second lowest health care spending as a proportion of GDP at 10.6%, Ontario and BC came in at 10.9%, and Quebec was at 11.3%. The national average that year was 10.6%.
In sum, the Calgary Herald editorial draws a false and misleading conclusion in claiming that it is because of supposed ballooning costs that health care has come to comprise 40% of our provincial budget. The fact of the matter is that health care has come to take a larger proportion of Alberta’s budget over the last 30-plus years because successive PC governments made substantial cuts to other public services, making health care appear, as the Calgary Herald put it, to “pinch other priorities.”
Health care in Alberta under the NDP
The 2015 election changed the course of Alberta’s history in many respects. The Prentice PCs presented a budget in March 2015 and treated the 2015 election like a referendum on its five-year fiscal plan. The PCs lost the election, of course, but Prentice’s budget documents give us a way to evaluate what the NDP have done on the health care file in comparison to a conservative vision of health care in the province.
On the one hand, unlike what the NDP have done in Budgets 2015, 2016, and 2017, Prentice’s fiscal plan was to make substantial cuts to core public services like health care and education (cuts that were reversed by the NDP). But, on the other hand, Prentice was going to debt-finance massive infrastructure spending, as the NDP have done. One of the big differences between the NDP’s capital plan and the Prentice plan is the NDP are funding the construction of a new cancer centre in Calgary, a complex that was not going to be built by Prentice.
Prentice planned to introduce health care user fees for Albertans earning $50,000 or more, but he also planned to cut almost $1 billion in health care spending in 2015-16 alone. Prentice never admitted this cut would cost front-line jobs, but the Ministry of Health’s 2015-16 annual report indicates the NDP’s cancellation of this cut “prevented the elimination of approximately 1,500 front line nursing and health care positions” (page 17).
Instead of health care user fees and a slight increase to the flat personal income tax system for all Albertans over three years, in 2015 the NDP introduced modest increases to the income taxes paid by large corporations and by people earning over $125,000 per year (bringing mild progressivity back to Alberta’s personal income tax system 15 years after Premier Klein eliminated it).
The NDP government’s goal has been to reduce the rate of health care spending growth—hence Starke’s quip about bending the cost curve cited above. In the six years prior to Budget 2016, the health care budget increased by an average of 6% per year. In Budget 2016, the NDP managed to maintain front-line health care services while keeping the annual health care spending increase to a bit less than 3% per year, slightly less than inflation plus population growth. The health budget will remain steady in 2017, with the 3.3% increase matching the estimated inflation plus population growth for the year. The health budget is forecast to be trimmed in 2018 by 0.9%.
One way the government contained costs in 2016 was by renegotiating the pay of physicians through a new deal with the Alberta Medical Association agreed to in August 2016 (to be fair, Prentice was also planning to renegotiate with the physicians if he won the 2015 election). The new compensation model rewards physicians for the amount of time and the quality of care given to patients, not just the number of services provided.
The two-year record of Premier Notley and the NDP is mostly one of championing public health care and reducing some of the more costly privatization initiatives. In August 2015, Minister of Health Sarah Hoffman announced the government would not move forward with the privatization of lab services, stating, “I’m of the opinion that this would have been an experiment. And I’m not prepared to experiment with people’s health and well-being.” The move to base decisions on evidence and not ideology has been a hallmark of the NDP government and stands in stark contrast to the approach of the PCs.
On March 10, 2017, the NDP government expanded the treatment hours for cancer patients in Calgary and Edmonton, making these medical services more accessible.
A new 10-year health care funding agreement between the governments of Alberta and of Canada was announced the same day. After British Columbia, Quebec, and Ontario signed similar agreements, Alberta was left with little choice but to sign the new agreement. The agreement will see Alberta receive targeted federal funding in home care ($703.2 million) and mental health ($586 million) over the next 10 years. These targeted investments are in addition to Canada Health Transfer funds.
On March 13, 2017, Minister Hoffman introduced Bill 3, the Voluntary Blood Donations Act. Friends of Medicare Executive Director Sandra Azocar applauded the introduction of Bill 3, saying, “Our bodies should not be for sale, whether it be blood, organs or other tissues. Albertans pride themselves on their generosity, and we should always aim to meet these medical needs through voluntary means."
On March 16, 2017, Budget 2017 was released. The budget includes a $200 million increase to home and community care. The funding increase is needed because the number of home care clients in the province has increased by about 20% in the past six years.
Budget 2017 also saw new funding announced for Edmonton’s aging hospitals. Over the next four years, Misericordia Hospital will receive $65 million for modernization and emergency room renovations, and over the same time period Royal Alexandra Hospital will receive $155 million to help build a new Child and Adolescent Mental Health facility.
In Budget 2017 the NDP also pledged $400 million for a new hospital in Edmonton, a much-need move given that Alberta’s capital city hasn’t seen a new hospital since 1988, when the city’s population was about half what it is now.
Major new capital investments in Alberta’s hospital sector is needed across the province because of how long the PCs neglected to maintain, let alone grow, our capital stock to keep up with population growth. Over two-thirds of Alberta’s hospitals are over 30 years old. Premier Lougheed was the first PC premier of Alberta and the only builder of the bunch over the 44-year political dynasty.
In sum, the NDP has taken a much different approach on the health care file than the PCs by containing costs without negatively affecting front-line services and by making decisions based on evidence and not ideology. While the NDP is doing pretty well on health care overall, they aren’t doing enough to address the long-term care crisis inherited from the PCs.
Alberta’s ongoing long-term care crisis
During the 2015 election, the NDP promised to open 2,000 public long-term care beds by the end of 2019, including 500 new beds in 2015. An October 2016 report from Parkland Institute shows that “the newly elected NDP government failed to deliver on its commitment to open 500 long-term spaces in 2015” (page 12).
The report also explains that the NDP’s promise of 2,000 long-term care beds is much too small to address Alberta’s long-term care crisis. The following chart from the report illustrates that Alberta’s population of seniors 85 years of age and over nearly doubled, from 33,273 in 2001 to 61,437 in 2015, while the number of long-term care beds has flatlined over the same period.
A recent opinion poll released by Parkland Institute shows 57% of Albertans (including 73% of NDP supporters, 47% of PC supporters, and 51% of Wildrose supporters) would be willing to pay higher taxes to provide more access to long-term residential care for seniors.
While it’s encouraging that the government is adding 200 public long-term care beds in a new Calgary facility and 145 new public beds in a refurbishing of CapitalCare Norwood in Edmonton, the NDP promised an average of 500 new public beds per year in the 2015 election and they haven’t met that target in any of its three budgets.
The main challenge identified in the Ministry of Health’s 2015-16 Annual Report is Alberta’s growing population and changing demographics. The report states, “Over the past 10 years, the province’s population increased at an annual growth rate of 2.6 per cent; and, by 2031, one in five Albertans will be 65 years of age or older” (page 17).
Based on that demographic forecast, it is clear that Alberta’s long-term care crisis is going to get much worse in the coming years unless the province immediately commits to making significant capital investments to build thousands of new public long-term care beds. The long-term care crisis didn’t appear overnight in Alberta and it will take years of consistent, large capital investments in new public facilities to even begin to address the crisis let alone solve it.
The NDP’s approach of making decisions based on evidence, not ideology, is a welcome change from the PCs’ approach. The NDP’s cancellation of the PC plan to privatize lab services is the most obvious example of the centre-left government reversing the PCs’ ideological push to further privatize health care in the province despite evidence that private health care costs more and is of lower quality than public care.
The NDP has been more successful at reining in health care spending growth while protecting front line services than recent PC governments. Keeping health care spending growth to population growth plus inflation in 2016 and 2017 is a significant accomplishment in a province that saw about double that rate of health care spending growth in 2010-2015.
Negotiations with various unions representing registered nurses, registered psychiatric nurses, health professionals, licensed practical nurses, and general support staff this year and next will be a challenge for a government committed to controlling costs while maintaining front line services. With Budget 2017 keeping health care spending growth equal to population growth plus inflation and forecasting a 0.9% cut to health spending in 2018, it seems safe to assume the government’s aim is to negotiation a wage freeze or near-freeze for unionized health care workers.
The government not only needs to find ways to gradually reduce health care costs over several years, but also to find ways to better spend health dollars.
The NDP has begun the substantial work of smarter spending. For example, their move to keep lab services public will save money, as will the renegotiation of physician compensation and the commitment to increasing home and community care.
Hospital care is far more expensive than home and community care. A 2014 article in the Canadian Medical Association Journal estimates that “a one-day stay in hospital costs up to $1000, but one day in a long-term facility costs about $130, whereas home care costs $55.”
A national pharmacare plan would go a long way in helping provinces reduce costs and spend smarter, but that’s a federal policy issue, and thus out of the control of the government of Alberta. It seems unlikely the federal Liberals have the political will to develop a national pharmacare program, so perhaps it is time for Alberta to look into the feasibility and costing of a provincial pharmacare program.
Lastly, the government of Alberta can and should go further in their efforts to stop subsidizing the profits of private health care corporations. Private long-term care facilities consistently cost more and deliver poorer services than their public counterparts. We need a tectonic shift in long-term care in Alberta. It remains to be seen if the NDP will rise to meet this challenge.