5/21/13

Health care spending continues decline



Contrary to the hysteria from conservatives, health care spending continues to decline as a percentage of the provincial budget.   Last year, health care accounted for 38.5% of total expenditures, this year the government plans to bring it down to 38.3%.  This continues the trend downwards since 2003/4 when health care accounted for 40% of total expenditures.

Austerity Redux
The provincial Budget reports that program spending is going up an impressive sounding 2.99% and health care spending is going up 2.3%.  Although that sounds like a larger than expected increase in these days of austerity, these figures are, unfortunately, misleading. The reason is that last year funding fell well short of the Budget plan and the government is now playing catch-up.

The 2013 Budget indicates that the government spent considerably less than it budgeted in the 2012 Budget.  For example, the Ontario government spent $595 million less on health in 2012-13 than it budgeted, a 1.2% reduction.

Overall, total spending was $2.4 billion less than budgeted -- that is a decrease of  just less than 1.9%.  Indeed, comparing Budgets, total interim expenditure in 2012-13 was actually $600 million less than total interim expenditure in 2011-12. This reduction is entirely accounted for by a reduction in program spending of $900 million (falling from $114.5 billion in the interim report for 2011-12 to $113.6 billion in the interim report for 2012-13).

Bottom line – the 2.99% increase in program spending promised for this year is catch-up.  With that increase we do equal the program spending planned for this year in last year's Budget, but, given considerably lower than expected interest on debt, the total expenditure plan is actually $600 million less than planned in the 2012 Budget for 2013-14.

The 2013 Budget sets total spending only 1.1% higher for 2013-14 than the 2012 Budget planned for 2012-13.  Similarly, health care spending planned in the 2013 Budget for 2013-14 is only 1% higher than planned in the 2012 Budget for 2012-13.

As noted repeatedly on this blog, the government consistently (and wildly) overestimates its deficits.  But it's not just spending that it gets wrong, it's revenue too.  This year, revenue was almost $2 billion more in 2012-13 than forecast in the 2012 Budget.  (They also overestimated the interest on debt by $200 million.)

The government plans more of the same tiny funding increases in the future. 

 Summary of Medium-Term Expense Outlook
$ Billions
Interim
Plan
Outlook
2012–13
2013–14
2014-15
2015-16
Health Sector
47.8
48.9
49.8
50.8
Education Sector
22.4
24.1
24.6
24.8
Post-secondary & Training
7.4
7.7
7.8
7.8
Children's & Social Services
13.8
14.3
15
15.2
Justice Sector
4
4.1
4.1
4.1
Other Programs
18.3
17.8
17
16.1
Total Programs
113.6
117
118.3
118.8
% Increase

2.99%
1.11%
0.42%
Interest on Debt
10.4
10.6
11.1
12.2
Total Expense
124
127.6
129.5
131
 Source: Budget Table 2.19

Program spending is supposed to increase another 1.1% in 2014-15 and then really head to the cellar with a 0.4% increase in 2015-16, a miserly 0.0% in 2016-17, and a miserable 0.7% decrease in 2017-18.  This is supposed to balance the budget by 2018, but will be a dead weight for the economy  -- something even the Budget documents quietly recognize.  It will also provide sharply shrinking public services, as population, aging, and inflation will more than eat up such tiny nominal increases. 

Notably, the Budget reports that Ontario already has the lowest public sector program spending per capita:



Health Care
The government sticks to its usual script on health care in the Budget:
  •  They will continue to move surgeries and procedures currently conducted in hospitals to specialized “not-for-profit” clinics. The government specifically sites colonoscopies, dialysis, and vision care (citing, in particular, expanded glaucoma and retina surgery at the Kensington Eye Institute).
  • The Ontario Drug Benefit (ODB) program will become less and less universal by requiring higher-income senior ODB recipients to pay a larger share of their prescription drug costs starting in August 2014. To some ears, this sounds nice -- but if the affluent don't get any benefit from the program they may not support it (and remember the golden rule -- in this society, them with the gold make the rules).
  • Hospital base funding (i.e. funding for existing services) will continue to be frozen, but other pockets of money will be available, with a total funding increase of 1.7%. The Budget adds that a 1% increase in hospital funding equals $217 million, so this should equal $369 million in new hospital funding.
  • Funding for “home and community care services” (however that is defined) will increase by 5% -- up from a promise of a 4% increase last year (although whether that was delivered, who knows?).  For what it’s worth, the Budget suggests 5% increases will continue for 3 years. The government says it will be investing to reduce home care wait times for nursing services and improve personal support services for clients with complex care needs.
  • Long-term care homes will get a “two per cent annual increase in funding for direct resident care to address the increasingly complex care needs of patients.” Despite the rhetoric, there is no sign that the government will require LTC facilities to use this money to improve staffing levels through a legislated staffing standard.
  • The government continues their promise of 23 “Health Links” to encourage greater collaboration to enable high-needs patients, such as seniors and people with complex conditions, receive more responsive care in the right place.
More on how the government sees collective bargaining and public sector pensions in the Budget tomorrow.

2 comments:

  1. Do you know by any chance what the 5% increase for home and community care services accounts for in dollar?
    The 5% increase remains then for the next three years?

    ReplyDelete
  2. That's the government's promise -- a 5% average increase each year for three years. (But I wouldn't want to bet the rent on a government Budget promise. As noted they underspent this past year by quite a bit...)

    In terms of dollar figures, here is what the government said: "Investments in these services would increase by over $700 million by 2015–16 above 2012–13 investments, including $260 million in 2013–14." It looks like they are planning to increase it above 5% this year and less than the 5% average over the following two years (as they promise $260 M this year and only $700 M over three). The good news? At least the funding is front end loaded.


    What remains unclear, to me, is what exactly falls within the "home and community care" budget. If funding is going up $260 million this year, and that is a little more than 5%, the total spend for "home and community care" should be in the $5 billion range. And that includes a lot more than home care.

    ReplyDelete