Skip to main content

Compensation for unionized workers is a moderating influence on hospital costs

As part of his discussion of cost pressures on Ontario hospital funding, the Auditor General sites a recent major union hospital settlement with (he says) "an average annual pay raise of about 1.5%".  

He does not note that the 1.5% average is actually lower than the percentage the government intends to increase hospital funding -- less than one-half the increase in fact.  

So this compensation change is actually creating room for other hospital budget line items to increase at an above average rate.  If wages increase at a percentage rate less than the overall percentage funding increase, other line items can increase at an above average rate.  If (as is likely) the hospitals increase labour productivity, the percentage increase in the total wage package will be even less, leaving even more space for above average increases for other line items. 

That is going to be very helpful to the government.    For example, if health care funding increases 3.6% as planned, and compensation goes up 1.5%, and (as the Auditor suggests) employee compensation is equal to 50% of health care costs, then the government will be able to increase all other areas of health care spending by 5.7%.  That's a lot of help -- all thanks to health care employees taking a lower than average increase.  

The moderating role of compensation increases is also borne out when the Audtior reviews the major cost pressures in health care.  Using studies from the Ontario government, the TD bank, and the CD Howe Institute, he notes that long term annual increases in health care costs should range from 5.9% (according to the Ontario government) to 6.4% (CD Howe), or 6.5% (TD).  

This is about double the funding increases the Liberals and PCs propose  -- and that means there will be huge pressure to cut services.

Notably, most of those cost pressures come from areas completely unrelated to hospital employee compensation.

So, for example, TD estimates that utilization will drive up costs 2% annually, population aging 1% annually, and population growth 1% annually.  Inflation (which would include in part the nominal employee wage increases) would account for the other 2.5%.  And even the 2.5% inflationary pressures includes factors well beyond hospital union wage increases (which, in any case, are running below that rate, even excluding any productivity gains).

Comments

Popular posts from this blog

Ontario long-term care staffing falls far short of other provinces

CUPE and others are campaigning for a legislated minimum average of four worked hours of nursing and personal care per resident per day in long-term care (LTC) facilities.  New research indicates that not only is LTC underfunded in Ontario, it is also understaffed compared to the other provinces. 
LTC staffing falls short:  The latest data published by the Canadian Institute for Health Information (and based on a mandatory survey undertaken by Statistics Canada) indicates that staffing at long-term care (LTC) facilities falls far short of other provinces. 
Part of this is driven by a low level of provincial funding for LTC.





Ontario has 0.575 health care full-time equivalent employees (FTEs) per bed staffed and in operation.[1]  The rest of Canada reports 0.665 health care FTEs.[2] The rest of Canada has 15.7% more health care staff per bed staffed and in operation than Ontario.[3] 


No other province reports fewer LTC health care staff per resident (or per bed) than Ontario.[4]

Occupancy r…

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 ann…

Health care funding falls, again

Real provincial government health care funding per-person has fallen again this year in Ontario, the third year in a row.  Since 2009 real funding per-person has fallen 2.6% -- $63 per person. 

Across Canada real per person funding is in its fourth consecutive year of increase. Since 2009, real provincial funding across Canada is up $89 -- 3.6%.
In fact the funding gap between Ontario and Canada as a whole has gown consistently for years (as set out below in current dollars).

Ontario funds health care less than any other province -- indeed, the province that funds health care the second least (B.C.) provides $185 more per person per year, 4.7% more.  
Provincial health care spending in the rest of Canada (excluding Ontario) is now  $574 higher per person annually than in Ontario. 

 Ontario has not always provided lower than average health care funding increases-- but that has been the general pattern since 2005.
Private expenditures on health care have exceeded Ontario government increases …