5/3/17

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.

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