BRIEF TO THE STANDING SENATE COMMITTEE ON SOCIAL AFFAIRS, SCIENCE AND TECHNOLOGY

PRESENTED BY
REX GUY, NATIONAL PRESIDENT
FEDERAL SUPERANNUATES NATIONAL ASSOCIATION

FREDERICTON, 8 NOVEMBER 2001

Brief to the
Standing Senate Committee on Social Affairs,
Science and Technology
Presented by

Federal Superannuates National Association

The Federal Superannuates National Association represents retirees from the Federal Public Service, the Canadian Forces, the Royal Canadian Mounted Police and Judges (Judges Act). It currently has more than 120,000 members in 80 branches across Canada. Its principal objective is to protect and enhance the benefits of pensioners, specifically in relation to their pension plans and their health care plan. It is also involved, on its own or with other seniors groups, in advocating social policies and programs for an aging society. It is for this reason that FSNA is very much interested in the future of the health care system in Canada and why it is appearing before the Senate Committee.

Except for a National Office staffed by a relatively small group of professionals and support staff, FSNA is entirely a volunteer-based not-for-profit organization. The National Office has a research section that has expertise in health issues and policies.

This research capability provides FSNA with the opportunity to base this and other presentations on researched analysis. It also enables the Association to protect the interests and benefits of pensioners in relation to their health care plan and their dental plan.

Further information about the FSNA can be found on its Web site:
http://www.fsna.com/

The Health Care System: a System for all Canadians
The public health care system is a system for Canadians of all ages. While the needs of older Canadians have been central to its analysis while preparing this presentation, FSNA takes the view that the health care system must be fair to Canadians of all ages and of all social and economic backgrounds.

Is the Health Care System Broke?
Canadians are being bombarded with statements and articles in the media which imply that the health care system is broken and cannot provide the services guaranteed by the Canada Health Act (CHA) without a massive infusion of tax dollars. This view requires some critical analysis.

It is very difficult to get a complete assessment of how efficiently tax dollars are being spent. Most stakeholders, it seems, analyze the costs from their own self-serving point of view. An objective evaluation is required but not available. Indeed, there seems to be no consensus on what evaluation criteria an assessment of the total system ought to be based.

In terms of overall results, Canada persistently ranks among the top five Organizations for Economic Co-operations and Development (OECD) countries for life expectancy and in terms of public satisfaction, over 80 % of recent hospital patients are satisfied with their care. But the number of Canadians who feel the system is "working quite well" is down to 14% in 1999 from 45% a decade earlier. A recent study of seniors in five countries found Canadian seniors the least satisfied with their health system.

FSNA believes that much of this concern from seniors is a result of the relentless barrage of self-serving criticism from different groups in society. Rarely a day goes by without the news media publishing reports about the failing health care system and horror stories about lack of services. The many positive aspects of the system are only infrequently reported. Many Canadians, and perhaps especially seniors, base their evaluation of the system on the "bad press". The Committee has noted the need to somehow surmount entrenched interests in the system.

On the question of financing the health care system, all levels of government claim that they cannot cope with the increasing health care costs. For example, Ontario Premier Mike Harris is reported to have called for $7 billion more each year in transfers to the provinces to cover rising health care costs.

FSNA supports the Committee's view that finds complaints about funding are not completely valid until it is demonstrated that the Canadian health system is managed effectively. The following table comparing the systems in Canada, USA, and Sweden makes this point using mortality rates as an overall indicator of the effectiveness of a health care system:

MORTALITY RATES & HEALTH CARE COSTS, 1998

In the above table, the Canada-USA comparison illustrates that spending a lot more money does not necessarily result in better national health. The Canada-Sweden comparison shows that Sweden achieves the same results as Canada for three-quarters the cost. This comparison clearly indicates that there are inefficiencies in the Canadian health care system.

All levels of government have tried to contain costs in recent years. These efforts were largely directed at simply restricting or reducing government funding. They seldom involved fundamental reforms aimed at making the system more efficient. The result was that public health care institutions were faced with imposed cuts to budgets and staff that cannot be sustained over the long run. Effective reform has been postponed at considerable cost in terms of dollars and commitment of health care workers and institutions.

FSNA is concerned that changes to the system will not be based on objective evaluations but rather on myths and self-serving interests. Many Canadians consider, and rightly so, that the health care system is part of their identity as Canadians. Changes to the system must protect the fundamental objectives of the system and must be fair and equitable to all Canadians. Maintaining the five principles of the Canada Health Act must be the guiding direction for the changes that must be made, but the five guiding principles must be adapted to today's and tomorrow's environment and society.

Canadian Households:
the Forgotten Partner in the Health Care System
Households are an essential part of the Canadian health care system. They are the forgotten partner. The system cannot be properly reformed without this essential fact being acknowledged. Throughout the health care system, the definition of costs does not include direct household costs and the role of households as the fundamental interest group served by the system is largely ignored. As an example, the Patented Medicine Prices Review Board guidelines on economic cost-benefit count only those costs assumed by the health-system: hospitals, doctors, laboratories, etc. paid for by governments. It does not include the direct costs paid by households.

The exclusion of direct household costs is a common bias. Even the Senate Committee report does not explicitly include the users of the health system as part of the system. This oversight leads to a conclusion that the more services we include in the definition of "medically necessary", the more costly the public health care system becomes. While governments argue over which level is most at fault for the under-funding of health care, underlying much of the current debate is the assumption that everything paid for by individuals is not part of the health care system's cost. But government expenditures on health care are paid out of taxes imposed directly or indirectly on households, which also pay additional costs directly. All health care costs are paid out of the one wallet of households. Both the one-wallet principle and the OECD/Canadian Institute for Health Information (CIHI) definition of health care costs include households as well as government expenditures.

Canadians participate in the health system in two ways. As citizens they vote for the government that they think can best manage the system and pay for much of it through taxes. As households, they participate actively in the system. Households play a key role in treatment, households are the foundation of preventive medicine, and households pay for almost a third of health care over and above the taxes they pay. On some accounting frameworks, households pay more than the federal government does!

This approach to reviewing the total costs of the system changes the perspective on the health care system. Consider the important issue of downloading costs to the public. Since households are in the health system and their one wallet pays both taxes and uncovered health care costs, there is no a priori gain from downloading - the one wallet is equally empty under both options. The only real considerations are questions of efficiency and equity. Thus, when users are included in the definition of the health care system, the focus of debate becomes efficiency and fairness of the whole system rather than simply a question of managing government costs.

Primary Care Reform
Most of the recent analyses of the health system centre on cost saving reform, especially to primary care.

The Committee noted the need to constrain entrenched interests in the health care system without suggesting ways to achieve this. FSNA believes that well-informed participation by household representatives can provide the essential leverage for an efficient system. Many organizations represent various groups of households and these organizations should be invited to participate in the development of the changes to the health care system.

Recommendation:
Accordingly, FSNA recommends that governments promote informed participation by households and their organizations.

Pharmacare
Consideration must be given to a CHA mandated pharmacare program. In such a program, all participants, both governments and households, would buy the bulk of their drugs from a national formulary as part of that program. Benefits would include:

• Reduced prices for both households and governments because significant discounts can be obtained. (Including employer insurance, households purchase one and a half times as much prescription drugs as do governments.)
  
• Reduced drug costs through the more widespread application of intelligent prescribing practices like trial sizes for new drug maintenance regimes.
  
• Improved wellness by ensuring that the pharmacare system database warns of drug interactions. A recent Health Canada study finds that an estimated 5% to 23% of hospital admissions are due to drug-related illness. Based on this estimate, the cost of inappropriate prescribing for Canadian hospitals is approximately $256 million to $1 billion. Almost half of these events could be prevented by improving both patient compliance and physician prescribing practices.
  
• Reduced drug costs because aggressive formulary practice can weaken the pharmaceutical companies current marketing practices which currently cost over four billion dollars a year

FSNA estimates that a national pharmacare program would cost governments less than two billion dollars as long as it: would:

• Retain the participation of existing employer-funded drug plans
• Feature a significant co-payment by patients
• Feature an annual maximum payment by patients

As the Committee argues, drugs are an important part of modern medicine and the current smorgasbord of private and public assistance violates all CHA principles. The classical test for a policy change is that the new policy provides improved services at lower cost. Pharmacare passes this test.

Recommendation:
FSNA strongly recommends a CHA mandated pharmacare program.

Home Care
The Senate Committee found that effective home care could contribute to lower long-term costs for the health care system because:

• It reduces the pressure on acute-care beds by providing medical interventions in a lower-cost setting and making use of hospital resources only when really needed (that is, home care acts as a substitute for keeping the convalescent patient in an acute-care hospital);
  
• It reduces demand for long-term institutional care by providing a viable choice for aging Canadians to maintain their independence and dignity in their own homes (that is, home care acts as a substitute for nursing-home care);
  
• It enables palliative care patients to spend their final days in the comfort of familiar surroundings (that is, home care acts as a substitute for palliative care institutions).

For convalescent care especially, FSNA believes that a national program under the CHA will save costs and eliminate gross inconsistencies of the CHA principles.

Recommendation:
FSNA strongly recommends a CHA mandated home care program.

Medical Necessity and Adequate Timeliness

Recommendation:
FSNA recommends that medically necessary services and time standards be made part of the CHA

• There are currently gross inconsistencies in the application of both
• These inconsistencies contradict the four patient-oriented principles
• These inconsistencies explain much of the public's dissatisfaction with the present system
• Inconsistencies diminish medical care

Like the Committee we recognize that this will impose additional costs on the health care system. There are several sources of funds for these costs:

• Efficiency gains from primary care reform and household participation
• Increased taxes
• Downloading some of the costs to households

There are many proposals to download costs to households.

The most common proposal is a two-tier system.

FSNA is against a two-tier system because:

• it is inherently inefficient since it promotes duplication
  
• it is administratively complex
  
• it is politically inefficient since wealthy Canadians would have a weakened interest in the public tier
  
• it violates all five CHA principles.
  

Recommendation:
FSNA recommends that a two-tier system not be implemented.

Currently, the most common resort by governments is to download costs to households by not providing new medically necessary services, by imposing long delays, and by deleting existing services from government programs. We have already noted our support for CHA mandated services and timelines. With respect to the deletion of existing government provisions, each case has to be examined on its own merits, but all too often these actions violate the CHA principles. In addition, they do not save money for the total system. Many of these new costs are born by employers and some recent downloading clearly targets the drug component of employer-funded supplementary insurance. Employers will not assume these costs indefinitely.

User fees
In the debate, some have proposed user fees. FSNA is not categorically opposed to nominal user fees if it can be shown that they do not harm low-income Canadians and that they curb excessive demand.

FSNA believes that Canadians could experiment with such user fees in the context of a national pharmacare program as described above.

Recommendation:
Finally, FSNA - along with the majority of Canadians - supports higher taxes for health care if system reform cannot yield sufficient savings. In addition, FSNA recommends that the taxes be federal, and that the additional funds only be disbursed to provinces for audited system improvements.

A Final Word
Our health care system is a unique source of national pride. The system must reach beyond political and self-serving interests. Changes must be guided by the principles of the CHA. Governments at all levels must become partners in the changes and must stop their present adversarial approach. Canadians are fed up with the constant political posturing and bickering.

Summary of Recommendations
1: FSNA recommends that governments promote informed participation by households and their organizations.

2: FSNA strongly recommends a CHA mandated pharmacare program.

3: FSNA strongly recommends a CHA mandated home care program

4: FSNA recommends that medically necessary services and time standards be made part of the CHA

5: FSNA recommends that a two-tier system not be implemented.

6: FSNA - along with the majority of Canadians - supports higher taxes for health care if system reform cannot yield sufficient savings. In addition, FSNA recommends that the taxes be federal, and that the additional funds only be disbursed to provinces for audited system improvements.