Hospital funding increase less than last year's

Ontario revenue and  expense projections 2017/18

In  the lead up to the Budget, the government crowed  that they had heard the public and would improve funding for hospitals. However, based on government  announcements, they actually plan to lower the hospital funding increase this year.  

They state they will increase hospital funding $518 million, a 3% increase.  But, on closer inspection, the funding increase announced for last year was significantly higher.

In the 2016 Budget, Ontario announced that it would increase hospital funding $345 million -- about a 2% increase.  Subsequently, the government announced another $140.3 million for hospital funding in the Fall Economic Statement – bringing the total increase to $485 million.   That is, of course, already quite close to the much ballyhooed hospital funding increase of $518 million for 2017/18. 

But it looks very much like the actual hospital funding increase in 2016/17 was higher than $485 million – higher in fact than the $518 million increase announced for 2017/18.

A little after announcing the $140.3 million hospital funding increase, the province, in its 3rd quarter report, announced an investment of $95.4 million to support additional capacity for stem cell transplants in Ontario.  Sunnybrook hospital will become the second hospital in the Greater Toronto Area -- along with Princess Margaret hospital-- to provide a full range of Complex Malignant Haematology, including stem cell transplants.  Apparently a very small portion of this work goes outside of the country, but most of this work is done in Ontario hospitals. 

Now, in the new Budget, the government has raised their estimate of the in-year health care spending increase from $348 million (in their 3rd quarter report) to $483 million – i.e. another $135 million increase.  The Budget describes the $483 million health care in-year increase as “primarily due to additional investments in hospitals to support the needs of patients and reduce wait times, and funding to support additional stem cell transplants in Ontario.”

So, it is likely that at least half ($242 million) of that $483 million in-year increase went to hospitals.  In total that would mean that hospitals got, at least, a $587 million increase last fiscal year ($345 M + $242 M = $587 M).

That would be $69 million more than the announced increase for 2017-18 – 13% more.   

The announced hospital funding increase for this year (3.1%) is in fact exactly half of the percentage increase announced for all other non-Ministry of Health programs (6.2%).
This all suggests that more funding has got to be announced over the course of this fiscal year if they are going to keep crisis from the door - -just like last year.

Premier Wynne told the media shortly before the Budget that she had heard the complaints about hospital funding "loudly and clearly", that she knew hospitals needed her support and  that  help would be coming. 

On Budget day, however, we got an announcement of a smaller increase than the announced increases for last year and (as discussed last week) further confirmation that they plan to decrease hospital capital funding for new hospital beds and facilities. 

Apparently, we will have to speak more loudly and clearly to be properly heard. 

P.S. - - the good news?  Hospitals in low population growth communities around the province  are beginning to report funding increases at around 2% of ministry funding for the hospital.  This tends to confirm the suggestion in the Budget that all hospitals will get at least a 2% increase in ministry funding. That is better than has been the case.  The confirmation of at least that level of funding early in the fiscal year (which began April 1) provides some basis for supporters of public hospitals to build on as the year unfolds. 


More spending on new hospitals and new beds? Nope

Hospital funding:  There is something off about the provincial government's Budget claims on hospital capital funding (funding to build and renovate hospital beds and facilities).   

For what it is worth (which is not that much, given the long time frame the government cites), the province claims it will increase hospital capital spending over the next 10 years from $11 billion to $20 billion – or on average to about $2 billion per year.  But, this is just a notional increase from the previous announcement of future hospital capital spending. 

Moreover, even if we did take this as a serious promise and not just a wisp of smoke, the government's own reports shows they have actually funded hospital infrastructure about $3 billion a year over the 2011/12-2015/16 period.

So this “increase” is really a decrease from past actual spending. Even last year's (2016-17) hospital capital funding increase was reported in this Budget at $2.3 billion - i.e. about 15% more than they have announced, on average, for the next ten years.   

Last I heard, construction costs were going up, not down, so this latest announcement means  a slower pace of hospital faciilty construction and renovation. 

Even with higher spending on hospital capital funding in the past, the Auditor General complained in late 2016 that funding was billions of dollars behind what was needed. Unless there is a significant increase, things are going to get worse.

Funding for new hospitals

Nevertheless, it is good to see that the government is at least trying to take some political credit for growing hospital beds -- see for example yesterday's Toronto Star story on new hospital beds by clicking here.  That, at least, is a little diversion from the attacks on hospitals as appropriate service providers that have characterized this government in the past.  Community and labour campaigns in favour of hospital services can take some of the credit for that.   

The alleged increased level of hospital operating funding will be discussed in the next post.

Overall health care spending will decline as a percentage of total program spending by the province this year – despite all the claims by the government that it makes health a priority, that they have heard the demands for better care, and that they are providing a "booster shot" for health care.  

Total program spending is budgeted to increase 4.9% while health care funding is budgeted to increase 2.98%.  Program spending excluding health care is budgeted to increase from $71.3 billion to $75.7 billion -- a 6.2% increase.  So health care falls a full 3.2% behind the overall program spending increase of other ministries. 

A "Health Care Budget"?  This certainly doesn't look like health care was the winner in the funding battles.

The real winners in the Budget were Advanced Education and Skills Development, Community and Social Services, Infrastructure, and, as expected, electricity cost relief, and the environment and climate change. 

Hospital and long-term Care (LTC) funding will decline as a portion of total program spending, just as overall health care funding will decline as a portion of total program spending.

Long-Term Care:  “In 2017, an additional $58 million, representing a two-per-cent increase, will be invested in resident care.”  However $58 million is not 2% of total provincial LTC funding.  That would require roughly a $66 million increase (not even counting provincial social assistance and “other” provincial funding that ends up in LTC).    

This is likely 2% of the Nursing and Personal Care (NPC) envelop and, perhaps, the Program and Support Services (PSS) envelop, the two largest portions of provincial LTC funding.   

That increase will not allow for significant increases in staffing hours for either NPC or PSS hours.  The government's refusal to open new LTC beds when the relevant population (aged 85+) is growing very rapidly means that those who get into LTC require more and more care.  

So we are stuck with another year of no more time to care while residents need more and more care. 

The third LTC envelop funded by the province, raw food, will grow by 6% -- or $15 million. “The government will increase the food allowance by over six percent this year, or $15 million, to ensure that LTC homes can provide nutritious menus that are responsive to medical and ethno-cultural needs.”   Advantage Ontario (the new name for the not-for-profit long term care providers previously named OANHSS) called for a 3.9% increase to the raw food budget - -so they (like the for-profit providers) are thrilled with this increase. How this will play on industry profits is a good question.  

These two announcements amount to a $73 million increase – very roughly a 2.3% increase for those three envelopes overall. 

There is also another $10 million for the Behavioural Support program.  Some (but not all) of that will wind up supporting LTC.  The Province says it is working towards the goal of a Behavioural Support Ontario (BSO) resource in every long-term care home in Ontario.  Funding will also be provided to expand the “work already underway in the long-term care sector to improve access to training and supports for quality palliative and end-of-life care in long-term care homes.” They don’t put a dollar amount on this last item, so it is probably not much.

There was nothing in the Budget about new LTC beds and Advantage Ontario did not even mention it in their response (although they had made a big deal of this prior to the Budget).  The government continues to redevelop old beds.

Compared to other provinces, Ontario LTC funding relies on extraordinarily large private payments from residents for accommodation.  So this fourth envelop of funding is not so significantly affected by the Budget.

Home and Community Care: As per usual, the “Province is expanding home and community care programs, including home nursing, personal support and physiotherapy services, with an additional investment of $250 million this year.” 

These $250 million increases have gone on for some years, so there is not much reason to think that this will do much to remove the backlogs or stop the reductions in service to less ill patients than we have seen in the past several years. 

Ontario Drug Benefit Plan expansion:  “OHIP+” will be available to all children and youth under 25, regardless of family income. It will completely cover the cost of all medicines funded through the ODB Program. There will be no deductible and no co-payment. This should reduce the costs of employer-based drug plans. The government reports an annual cost of $465 million.

The Gold -- Government Revenue: Ontario nominal economic growth was a third higher than expected in 2016 (4.6% versus 3.4%).  The Province's tax revenue estimate for 2016/17 is up $3.2 billion more than the 2016 Budget and $1.2 billion more than the Fall Economic Statement. So, they now expect to end up with 3.5% more tax revenue than planned in the Budget. Unfortunately the government also revised its estimate of carbon allowance proceeds downwards by $500 million so the total overall increase for 2016/17 is up $2.6 billion over the 2016 Budget estimate overall, about 2% more than planned.

Similarly, the revenue estimate for 2017/18 is up $3.9 billion and up $3 billion for 2018/19 compared to the 2016 Budget estimate for those years. These are positive but not surprising changes, given better than expected real and nominal growth in 2016.  

Note however, the increase in expected revenue is entirely driven by greater than expected tax revenues – the other areas of government revenue (government business revenue, federal transfers, carbon allowance proceeds, and “other” non tax revenue) are generally dragging revenue expectations downwards over the next few years.

In total revenue grew 3.8% in 2016/17 (almost $5 billion) after bumper revenue growth of 8.3% (almost $10 billion) in 2015/16. 

The government hopes for significant increases in revenue in 2017/18 -- over 6%. Increased tax revenue and a one-off increase in “other” non-tax revenue are supposed to be the key factors in this growth. That level of revenue growth is important for their zero deficit goal. A pause in economic growth or nominal economic growth could create problems.   

But we may not have heard the full story on revenue for even 2016/17.  Last fall, the final accounting for 2015/16 in the Public Accounts  added a surprising $1.9 billion to revenue, significantly improving the books at the last moment. That would certainly improve future revenue prospects -- if it happens again.     

Net Debt as proportion of the economy falls for third year in a row: Progressive Conservatives, rightly fearing (from their conservative perspective) the potential for increased pressure for improved public programs, have begun to re-focus on the province's debt accrued over the years. With the deficit gone, that argument against public social programs is mortally wounded (although the PCs haven't quite given up all hope they can find some way to breath life into the deficit monster). 

However, even the new "debt" line of attack on public programs has been weakened. The province's net debt as  a percentage of GDP (see bottom of the chart below), the key measure of the province's ability to pay its debt, is now planned to be over 1.6% lower than its high in 2014/15 of 39.1%. More cuts in the debt to GDP ratio are quite possible. 

The Future: The government expends a fair bit of energy diverting attention to future health care funding increases.   They claim they are going to increase health care funding 4.7% in 2018/19 (see the funding numbers in the chart up top).  

That would be just in time for the election. 

It would also put health care funding increases closer to health care cost pressures, albeit  still below the level set by even conservative advisers. According to the Budget, this would also be more than double the increase other ministries would get, for a change.

In any case, for 2019/20 (after the election) they only promise a 3.1% health care funding increase. 

Hopefully, this is just an opening salvo. It would be a pity if the “booster shot” wore off after the election.


Cash give-aways haven't helped the Liberals so why double down?

The government has answered the question about who might benefit from the improved fiscal situation of the province.  At least in part.

The government's announcement that they will spend $2.5 billion over three years on hydro subsidies (an average of  $833.3 M per year) takes them further down a road they have already tried, without much to show for it.  

Premier Kathleen Wynne implicitly confirmed growing government revenue but cautioned that this latest cash give-away is putting them closer to falling back into deficit.  She stated:
"Thanks to a provincial economy that is leading all of Canada growth, we can make this change and stay on track for a balanced budget next year and the years to follow.  But it’s going to be a lot harder now and we’ll remain a lot closer to the line."
So far these sort of cash give-aways have accounted for the large majority of the new, in-year spending that has marked the tentative move away from government austerity that began last fall. 

The conclusion the government seems to have drawn from their huge hydro cash give-away in the fall (the "HST tax cut") is that it wasn't enough. 

So they have doubled down.

Well it's true that the previous cash give-away hasn't helped the government's polling numbers.

But will more cash give-aways help them any better? It's pretty easy to forget about something you are no longer paying. 

In contrast, it's hard to ignore mounting problems in your public services. 

New funding announcements aimed at simply maintaining public services amount to only a small fraction of the cash give-aways announced.  

As a result, public services are still starving on an austerity diet.

Wynne's comment, noted above, seems aimed at managing expectations that there are more spending announcements to come. But with an election just over a year away, a Budget in the offing, growing government revenue, and perhaps little to show for the cash give-aways, there probably is more to come.  

But surely no more tax cuts or cash give-aways. 

For his part, Patrick Brown now feels compelled to release Progressive Conservative (PC) hydro policy in the next few weeks. This is a change from the cloak of secrecy he has put up around PC policy, whatever it is. Previously the plan was to announce PC policy at their November convention. 

But there is no sign yet that they will announce anything early about their health care policy.   Who knows what they might do -- hospital cuts? more austerity? Exactly what Brown stands for is as clear as mud. 


Ontario government spending grows. But the deficit falls like a stone

Yesterday’s third quarter report from the Ministry of Finance indicates that their estimate of the deficit for 2016/17 fiscal year has fallen by $2.4 billion -- from $4.3 billion to $1.9 billion.

This despite the announcement of another $223 million in new spending increases for 2016/17.  If you recall, the government announced even more in-year spending increases in the fall for Hydro rebates and hospitals.  

Since the 2016/17 Budget, they have now increased program spending about $1.1 billion through in-year increases.  That is an in-year increase in program spending of 0.92%.  

This is quite unusual for a government that typically under-spends their budget.  

The new increased expenditures announced yesterday are mostly on a specific hospital based service and drugs:

·    Ontario Drug Benefit Program: an additional $106.0 million to address funding requirements for the Ontario Drug Benefit program.
·    Malignant Hematology including Stem Cell Transplants: an investment of $95.4 million to support additional capacity to provide stem cell transplants in Ontario, which require specialized facilities and staffing, including creating a new unit at Sunnybrook Health Sciences Centre, as well as OHIP out-of-country costs for stem cell transplants that cannot be accommodated in Ontario.

Health spending is now forecast to be $347.6 million higher than forecast in the 2016/17 Budget. That's the biggest increase of any ministry -- although at 0.67% far from the biggest percentage increase of any ministry.   

Tempering these expense increases is the previously reported $381 M decline in interest expense on the debt. As a result, total expense is up $737 M.

Following an expert panel's report on pension accounting discussed in a previous note, the government is indeed sticking to its preferred accounting method for the teachers and civil servant pension plans, significantly reducing the debt and deficit.  With this, the key debt to GDP ratio is now scheduled to fall for a second year in a row -- hitting 38.3%.
The large majority of the in-year decrease in the deficit measured against the Fall Economic Statement is the reversion to the long held accounting practices for these pension plans.  

But this obscures the fact that since the Budget (which also used the government's preferred budget accounting method for the pension plans), there has been a dramatic increase in revenue thanks to increases in a variety of taxation categories.  The big gains were in corporate taxes (up $1.1 B since the Budget) and sales taxes (up $803 M).  Both of these categories have also seen significant increases since the Fall Economic Statement (very significant in the case of sales taxes)Income taxes are also up significantly since the Budget ($726 M) -- but the estimated increase is significantly less than in the Fall Economic Statement.

In total, revenue is up almost $400 million since the Fall Economic Statement and up $2.52 billion since the 2016/17 Budget.   That big increase in revenue largely explains the $2.4 billion reduction in the deficit since the Budget -- when the pension plans were accounted for on the same basis as this third quarter report. 

The government has gotten some favourable media about falling deficits through this third quarter report -- something I can't recall happening before from a usually forgotten report.  

But they are likely saving more good news for the upcoming Budget or the close out of the 2016/17 books with the Public Accounts in late September.  Those are higher profile announcements and much closer to the 2018 election.  

Bottom line: revenue is increasing, the deficit is falling, and the government has shown an uncharacteristic willingness to spend more in-year than budgeted. 

On the fiscal front, things are looking up – at least in the short term.  Some will benefit, but, as always, the question remains, who?  


The end of provincial public sector austerity in Ontario?

The experts appointed to review the claim by the Auditor General that the surpluses in the teacher and civil servant pension plans cannot be counted as government assets have reported.  

Importantly they have sided with the government and against the Auditor General, Bonnie Lysyk.

Lysyk's pension surplus accounting policy required the government to add $10 billion to the provincial debt and $1.5 billion to the deficit last fall. Only then did she approve the final provincial government books for 2015-16 (the Public Accounts).  

The government estimates this policy would add $2.2 billion to the deficit this fiscal year (2016-17).   Indeed, according to the Finance Ministry's Fall Economic Statement the extra program expense associated with this policy is increasing at a rate of $600 to $900 million per year through until at least 2018-19.  The Ministry of Finance reports that this policy would add $2.8 billion  in program expense in 2017/18 and $3.7 billion in 2018/19. 

Ontario fiscal outlook improves

But if this policy is over-ruled, the government could actually spend those billions on public programs (like health care services) and not fall back into deficit. 

This is significant as getting out of deficit has been this government's key measurement of their  own success as fiscal managers -- at least in their public statements.

So the big news (reported by the Toronto Star) is that Treasury Board president, Liz Sandals, now says, for good or ill, that the government is "committed to implementing the advice of this independent panel and will use it in preparing the province's financial statements."   

If so, and if this accounting policy is applied to this fiscal year, $2.2 billion should come right off the top of the deficit. Given that this government always put significant padding into their Budget deficit estimate,  that they reduced the deficit by over $5 billion last year and that they are  (nominally) planning
only a $700 million reduction this year, it is at least possible that the entire deficit will be eliminated this year -- one year earlier than planned.  

Even without this accounting change, the government claimed that they would be deficit free in 2017/18 and 2018/19. So they would be deficit free even with  $2.8 billion in extra program expense  in 2017/18 and $3.7 billion in extra program expense in 2018/19 due to the Auditor General's pension accounting.  

Program expense is $125.3 billion this year. So saving $2.8 billion in program expense should free up 2.23% of program expense for other purposes.  The government was already planning a $2.4 billion (1.92%) increase in program expense for 2017/18, so this, in effect, more than doubles their room.  

Ontario fall economic outlook
In total, simply based on their own statements to date, the government has room for $5.2 billion in program expense increases -- over a 4.1% increase.

If provincially funded programs did get a 4.1%  increase, that would be a modest break with the harsh public sector austerity since the recession in 2008-09.  That could help the Liberal re-election campaign in 2018.  It would not however match the widely accepted cost pressures faced in health care.

Of course, just because they have the space, doesn't mean they will use it for good.  For example, the government could blow the cash on tax cuts for the wealthy.  The tax cuts they have provided to date for corporations amount to tens of billions of dollars and there is little doubt that corporations have big plans for all the new found cash. 

Another issue is what position the Auditor General will take. Notwithstanding, Sandals declaration that the government will implement the advice of the expert panel, the Auditor General still has to sign off on the Public Accounts for 2016/17 which are due in September.   

Whatever the Auditor's conclusions, she does not sign off on the Budget (upcoming in the next month or so) and the 2017/18 Public Accounts won’t go to the Auditor General until after the next election.


Few hospital beds & sparse hospital staff means overflowing hospitals

There's a lot of news stories of late about hospitals overflowing with too many inpatients and not enough beds. Here's some of the headlines:




What is not so often reported is that this is directly related to Ontario's policies of very high hospital bed occupancy and very few hospital beds.

The graph below shows curative hospital bed occupancy in European countries -- with occupancy levels usually hovering around 75%. The exceptions are Ireland (which has well above average occupancy) and Macedonia and the Netherlands (which have well below average occupancy). Between 2008 and 2014 most countries saw a small decline in bed occupancy. 

European hospital bed occupancy
Under the OECD definition, "curative" hospital beds excludes rehabilitative and long term care beds.  Eurostat, “Health care resource statistics – beds,”  2016, http://ec.europa.eu/eurostat/statistics-explained/index.php/Healthcare_resource_statistics_-_beds
Ontario however often has hospitals with bed occupancy over 90% in all sorts of hospital beds -- chronic care, rehabilitation, acute care, mental health care. It is not specially unusual for larger urban centres to have occupancy over 100%, and sometimes far over 100%.

Since 1990, Ontario has eliminated 19,000 hospital beds (and 30,000 beds since 1980). The result is that Ontario is now an extreme outlier in terms of the number of hospital beds. Directly connected with this, the rest of Canada has about 22% more hospital staff than Ontario. 
hospital staffing in Canada The OECD, the club of rich nations, reports the number of beds per thousand for its thirty-four members.  The  average (excluding Canada) for the most recent year reported is 4.9 hospital beds per 1,000 population (see chart below). 

Ontario has about 2.2 hospital beds per 1,000 population, well less than half the average number in other developed nations. 

So it is hardly surprising that Ontario hospitals often have extremely high bed occupancy rates.  Given the  limited number of beds, it is a great credit to the efficiency of Ontario hospitals that overflows do not occur more frequently.

Notably, the Ontario Hospital Association  claimed this week that "in November, recognizing the need to open more beds and address wait times in hospitals, the Ontario government provided an additional $140 million for hospital services."

For years, the government has simply ignored or blithely dismissed the need for more hospital beds. So this is, perhaps, an interesting, if very modest, turn to the good. 

 hospital beds per 1000 population OECD