Ford PC government plans years of cuts to hospital services

The pandemic led to a brief reprieve from the austerity that has bedevilled Ontario hospital care since the great recession. After decades of being on par with other provinces, hospital funding fell far behind the rest of Canada.

At the start of the pandemic the Ontario government was obsessed with the lack of capacity in Ontario hospitals, tragically compounding the crowding in long-term care by ordering hospitals to discharge patients to long-term care.  Despite the mass death in long-term care, very few sick or dying resients were transferred for treatment in hospital. They died in their homes.  

But the government also moved to increase hospital funding in 2020-21 -- increasing it by more than ever before. That new money is temporary, however.  

Cuts are coming: The government established a budgeting system in 2020-21 which would see much of the COVID-related funding budgeted under special funds distinct from the normal ministry line items. So, much of the increased funding for the Ministry of Health or Ministry of Long-Term Care is not reflected in their line items, but instead through special funds that are then later allocated to a ministry. This makes removing those funds easier than if they were incorporated in the ministry budgets. In fact, the 2021-22 Budget plans to cut COVID health care funds by $3.25 billion. 

As a result, health sector funding is planned to be cut by $227 million this year.[1] Both hospital funding and LTC funding in total are planned to be less this coming year than last – about $512 million less for LTC and $1.5 billion less for hospitals.[2] Billions more in COVID funding will be cut in the years after that.

And even setting aside the cuts occasioned by falling COVID money, government funding plans for non-COVID related health care are inadequate. 

Even before the 2021-22 Budget, the Financial Accountability Office (FAO) noted that the health, education, and social service funding plans  fall behind cost pressures in the years ahead. That means real cuts in service levels will be implemented. 

In the health sector, base spending is projected to grow at an average annual pace of 2.9 per cent, below the projected growth of 4.6 per cent in key cost drivers of the health care sector, such as health inflation, population growth and aging.[3]

For health care, the gap between cost pressures and funding would then be 1.7% annually.[4]   

The FAO also noted, however that the deficit will remain very large, levelling out at $16 billion. In light of this, the FAO envisaged a scenario where health care would be cut by a further $4.2 billion annually.[5]

As it turns out, the funding now planned by the government in its latest 2021-22 Budget is actually much worse. The plan is for health sector annual funding to fall well short of 2.9%.

Instead, the new Budget plans a health sector (non-COVID) funding increase of 1.1% in 2022-3 — a total increase of $700 million. In the same year, the government plans to spend $500 million more on needed LTC staffing and tens of millions more on new (and needed) LTC beds. That will leave little or nothing to deal with other, very real cost pressures in the rest of health care (including other aspects of LTC).

A somewhat larger increase ($1.4 billion or 1.98%) is planned for the following year, but, again, much of this will be consumed by increased LTC staffing hours and new beds.

The long-term plan (2021-23 through 2029-30) is much the same, with health sector increases averaging 2%. This is well less than half the annual cost-pressures of inflation, aging, and population growth. 

If we use the modest [6] cost pressure estimate made by the FAO (4.6%), cost pressures would have exceeded funding by 22% over the eight years between 2021-22 and 2029-30. In the first year the gap is $2.4 billion.

Here’s the chart:

In other words, the plan is to implement $18 billion in real annual health care cuts by the end of this period.

For many years, hospital funding has not kept up with overall health care funding. But if, by some chance, hospital funding did actually keep up with health care funding, hospitals will still fall billions of dollars behind cost pressures: 

Hospitals will fall almost $600 million behind in the first year and over $4.4 billion in year eight. Assuming staffing follows funding, that would mean 15.3% less staff relative to demand.[7] This would be like operating hospitals today with almost 34,000 fewer staff.

There is inadequate hospital funding and capacity in Ontario. Despite a brief increase to address capacity issues during the pandemic, the new plan is to cut services, cuts that will get worse as the years pass. We are going back to exactly where we were before the pandemic: under capacity and under threat. Nothing has been learned from the capacity crisis illuminated by the pandemic - - just the reverse. Local communities must send a strong message that their hospitals services cannot be cut, and instead we must move away from the practice of under-capacity and learn the lessons of the pandemic.

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[1] The Ontario Budget 2021-22, Table 3.12, https://budget.ontario.ca/2021/chapter-3.html#t3-12

[2] The government’s claim of $1.8 billion in additional hospital funding is misleading.  The Budget claims “Ontario will invest an additional $1.8 billion in the hospital sector in 2021–22 bringing the total additional investment in hospitals since the start of the pandemic to over $5.1 billion.” Note that the $1.8 billion “additional investment” is not a true increase – i.e. an increase in spending over the previous year.  Instead it is   claim of an increase since  the start of the pandemic – i.e. in fiscal year 2019-20, two fiscal years ago.  A similar misleading claim is made regarding LTC funding.

[3] The Financial Accountability Office, Economic and Budget Outlook, Winter 2021, https://www.fao-on.org/en/Blog/Publications/EBO-WI2021 .

[4] Other estimates of health cost pressures are significantly higher, making the annual loss higher. 

[5] This scenario makes the assumption that the PCs will increase taxes.  But the actual experience so far is that, even this year with the deficit hitting unprecedented levels, the PCs substantially decreased corporate taxes and provided significant corporate subsidies. 

[6] The FAO estimate is lower than most other estimates, which have generally placed health care cost pressures above, and sometimes well above 5%.

[7] Funding would be cut 18%, but as provincial funding only represents approximately 85% of hospital funding  the impact of the cut would only be 15.3%