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Canadians’ Access to Quality Health Care: A System in Crisis : Submitted to the House of Commons Standing Committee on Finance 1999 Pre-budget consultations

https://policybase.cma.ca/en/permalink/policy1987
Last Reviewed
2019-03-03
Date
1998-08-31
Topics
Health human resources
Health systems, system funding and performance
  1 document  
Policy Type
Parliamentary submission
Last Reviewed
2019-03-03
Date
1998-08-31
Topics
Health human resources
Health systems, system funding and performance
Text
I. INTRODUCTION The Canadian Medical Association (CMA) commends the federal government, in its second mandate, for continuing the public pre-budget consultation process. This visible and accountable process encourages public dialogue in the development of finance and economic policies of the country. As part of the 1999 pre-budget consultation process, the CMA welcomes the opportunity to submit its views to the House of Commons Standing Committee on Finance, and looks forward to meeting with the Committee at a later date to discuss our recommendations and their rationale in greater detail. II. POLICY CONTEXT While the current and future status of our health care system is a top priority for all Canadians, it is evident that their faith in the system’s ability to ensure access to quality care is eroding. In May 1991, 61% of Canadians rated the system as excellent/very good. By February 1998 that rating had slipped to 29% - a dramatic decrease in the confidence level of Canadians in the health care system. 1 Unfortunately, their outlook on the future of the health care system is not much better. Some 51% of Canadians believe that their health care will be in worse condition in 10 years than it is today. 2 It is not surprising that Canadians are losing confidence in the future sustainability of the health care system. They have experienced firsthand the decline in access to a range of health care services (see Table 1): * 73% reported that waiting times hospital emergency departments had worsened, up from 65% in 1997, and 54% in 1996 * 72% reported that waiting times for surgery had lengthened, up from 63% in 1997, and 53% in 1996 * 70% reported that availability of nurses in hospitals had worsened, up from 64% in 1997, and 58% in 1996 * 61% reported that waiting times for tests had increased, up from 50% in 1997, and 43% in 1996 * 60% reported that access to specialist physicians has worsened, up from 49% in 1997, and 40% in 1996 [TABLE CONTENT DOES NOT DISPLAY PROPERLY. SEE PDF FOR PROPER DISPLAY] Table 1 (a) [TABLE END] [TABLE CONTENT DOES NOT DISPLAY PROPERLY. SEE PDF FOR PROPER DISPLAY] Table 1 (b) [TABLE END] Clearly, these findings are significant, and demonstrate the public’s increasing concerns regarding current access to quality health care, as well as the future sustainability of our health care system. Canadians have made it clear that it is not, nor can it be, “business as usual” in attempting to meet their health care needs as we move into the next millennium. Medicare, Canada’s crowning social policy achievement, is in crisis. It is time for the federal government to re-establish its leadership role in this strategic priority area. The CMA has repeatedly placed its concerns about access to quality health care on the public record. Physicians, as patient advocates, have consistently expressed their frustration with the difficulties faced in accessing medically necessary services - only to fall on the deaf ears of the federal government. In surveying Canadian physicians on the front lines, they know the degree of difficulty in accessing services that their patients need: 3 * only 27% of physicians surveyed rated as excellent/very good/good their access to advanced diagnostic services (e.g., MRI) * only 30% of physicians surveyed rated as excellent/very good/good their access to long-term institutional care * only 45% of physicians surveyed rated as excellent/very good/good their access to psychosocial support services * only 46% of physicians surveyed rated as excellent/very good/good their access to acute institutional care for elective procedures These findings are cause for concern. Particularly troublesome is that only 63% of physicians surveyed rated as excellent/very good/good their access to acute institutional on an urgent basis. The cause for this crisis of confidence is clear - the federal government's unilateral and repeated decreases in the rate of increase in transfer payments beginning with Established Financing Programs (EPF), established in 1977, and continuing for the next decade-and-a-half. It culminated, in April, 1996, with the severe and successive cuts in cash transfers for health, post-secondary education (PSE) and social assistance via the Canada Health and Social Transfer (CHST). The CMA is not alone in its view. In addition to the public, other health groups and the Provincial and Territorial Premiers have expressed serious concern about the sustainability of the health care system and the urgent need for Federal leadership and reinvestment. Following their meeting in August, 1998, the Premiers "re-affirmed their commitment to maintaining and enhancing a high quality universal health care system for all Canadians and observed that every government in Canada but one - the federal government - has increased its funding to health care - the people's priority". 4 Underscoring the Premiers' view was a detailed proposal submitted to the federal government calling for an immediate increase in CHST cash transfers. From Federal Government Acknowledgement to Action At the 1997 Annual General Meeting of the CMA in Victoria, the federal minister of health, Allan Rock, stood before delegates and acknowledged "the very real anxiety that's being felt by Canadians" over the future of the health care system. 5 The minister also conceded that cuts to transfer payments have not been insignificant and have had an impact on the system, a point on which the CMA wholeheartedly agrees. The CMA recognizes that the federal government has made a series of difficult decisions when it comes to its funding priorities in order to restore our country’s fiscal health. However, the time has come to consider the fundamental issue of reinvesting in the health of Canadians. The federal government must move beyond the rhetoric in terms of acknowledging the pain and suffering that the cuts have caused, and move to an agenda of action by showing leadership and making the necessary and overdue re-investments in our health care. At a time when the federal government is beginning to reap the benefits of a fiscal dividend, it must recognize that health care is not simply a consumption good that, once spent, provides no additional benefits. Investments in the health care system provide a substantial and lasting social rate of return in terms of restoring, maintaining and enhancing Canadians health. Furthermore, in an increasingly interdependent and global marketplace, a sustainable health care system must be viewed as a necessary precondition for Canadians to excel, thus strengthening the link between good economic policy and good health care policy in Canada. They should not be viewed as competing against each other or that one must be sacrificed at the expense of the other. The 1998 federal budget ignored Canadians' number one concern and did nothing to bolster their confidence that the system will be there when they or their family need it. In responding to the massive reductions in cash transfers to the provinces and territories, in his February 24, 1998, budget speech, federal finance minister Paul Martin announced that he had increased the floor under cash transfers to the provinces in support of health and other programs from the $11.0 billion to $12.5 billion annually and further that it "will provide provinces with nearly $7 billion more in cash over the 1997/98 to 2002/03 period”. 6 While this was announced as an "increase" these statements are misleading. It must be remembered that this is not “new” money; the $12.5 billion represents nothing more than a partial restoration, which falls $6.0 billion (or 32%) short of the cash floor of $18.5 billion prior to the introduction of the CHST in 1996/97. To date, the cumulative impact of cuts to the Canada Health and Social Transfer (CHST) in 1996 and 1997 amounts to a $15.5 billion withdrawal in federal cash from health and social transfers. Their impact is still working its way through the system and being felt in patients' pain and suffering and unfortunately, even death. The CMA has consistently stated publicly that the integrity of the health care system is being jeopardized by reductions to federal cash transfer payments for health. The federal government, however, has failed to respond to these concerns. Unless the federal government reinvests in health care, it will only deepen the crisis of confidence Canadians share about the future sustainability of the health care system. III. HEALTH CARE FUNDING AND THE FEDERAL ROLE The Federal Role When it comes to the health care system, the federal government’s role is aimed at ensuring that Canadians have access to health care services under “uniform terms and conditions”. This derives from the government’s right to exercise its spending power and has been manifested over the past 40 years through a number of cash-transfer mechanisms to the provinces and territories, framed more precisely by the principles of the Canada Health Act (i.e., public administration, comprehensiveness, universality, portability and accessibility). Since the inception of national health insurance in Canada, the federal government has played a central role in the funding of health care. Until 1977, the government reimbursed each province 50 cents on each dollar spent in the areas of hospital and medical care insurance. Following a renegotiated formula, government moved from a “cost-sharing” to a “block funding” formula from 1977/78 to 1995/96. Federal-provincial transfers were distributed through a funding mechanism known as Established Programs Financing (EPF). Under EPF, a combination of (basic) cash and tax points were transferred to the provinces for health care and post-secondary education (PSE). While both the tax points and cash components are important in funding health care, there are those who argue that the level of federal cash should be viewed as a true reflection of the government’s commitment to health care. This is significant for two reasons. First, it demonstrates the priority the government places on our health care system, and secondly, the cash component (which can be withheld under the Canada Health Act) can play an important role in preserving and enhancing national standards. 7 The Origins of Federal Cash Withdrawal The genesis for the crisis in confidence about the future of Canada’s health care system can be traced to 1982, when the federal government introduced a series of unilateral decisions which reduced its cash contributions to the provinces and territories for health and other social programs. Figure 1 highlights the changes made to the EPF formula used to fund health and post-secondary education between 1977 and 1995. These unilateral changes, resulted in the withholding of approximately $30 billion in federal cash that would have otherwise been transferred to provincial and territorial health insurance plans (and an additional $12.1 billion for post-secondary education - for a total of $42.1 billion). 8 This dollar amount is of no small consequence when it comes to ensuring that all Canadians have access to quality health care. [FIGURE CONTENT DOES NOT DISPLAY PROPERLY. SEE PDF FOR PROPER DISPLAY] Figure 1 [FIGURE END] Into the Mist... Prior to April 1, 1996 the federal government's commitment to insured health services, post-secondary education and social assistance programs could be readily determined since the federal government made separate notional cash contributions to the provinces and territories in each of these areas. 9 Announced in the 1995 federal budget, the creation of the Canada Health and Social Transfer (CHST), on April 1, 1996, saw EPF merge with the Canada Assistance Plan (CAP). In effect, health, post-secondary education, and social assistance were collapsed into one large cash transfer. At the time, the government claimed that the CHST was “a new approach to federal-provincial fiscal relations marked by greater flexibility and accountability for provincial governments, and more sustainable financing arrangements for the federal government.” 10 In reality, the increased “flexibility and accountability” was accompanied by a $7.0 billion reduction in the cash portion of the new transfer, and introduced a lower level of transparency with respect to where and what proportion the federal government notionally allocated its dollars for health, PSE and the social programs previously funded under CAP. In its 1998 budget, the federal government moved to partially restore CHST funding by establishing a new cash floor of $12.5 billion (see Table 2) - however, this is still $6.0 billion short of the pre-CHST cash floor. To date, the cumulative impact of previous CHST cash reductions in 1996 and 1997 amounts to a $15.5 billion withdrawal of cash from health and social transfers to 1998/99. By 2002/03, it is estimated that $39.5 billion will have been removed from the CHST. This is in addition to the $30 billion withheld from fiscal transfers that would otherwise have gone to the provinces and territories for health between 1982 and 1995. 11 [TABLE CONTENT DOES NOT DISPLAY PROPERLY. SEE PDF FOR PROPER DISPLAY] [TABLE END] Furthermore, in addition to the current cash floor, the cash entitlement will stagnate at $12.5 billion, as adequate provision has not been made to maintain the value of the cash portion of the transfer. 12 This means the spending power of the cash entitlement will continue to erode as the health care system is forced to meet the changing needs of Canadians based on population growth, aging, epidemiology, new technologies and inflation. With the introduction of the CHST, the disappearance of health, post-secondary education and social assistance into the shadowy mist makes it impossible to hold the federal government accountable with respect to its relative commitment to each of these important policy areas. Using the pre-CHST percentage distribution, the federal government’s current cash allocation to health care stands at roughly $5.0 billion, or 7% of total health care expenditures. This is not surprising considering that the “H” in CHST was added later, only after health organizations protested its absence. Based on the reduced federal cash contribution to health care, it would appear that the government has made a conscious decision to abdicate its responsibility and leadership role in funding health care. While claiming to uphold the integrity of our national health care system, the reality of reduced cash transfers has forced all provinces and territories to make do with significantly fewer federal dollars for health. Federal “offloading” at its best has allowed the federal government to meet (and exceed) its own financial projections; at its worst it has forced the provinces and territories to consider a series of unattractive options: re-allocate program spending from within current budgets; deficit-financed program spending; or reduced program spending. To be clear, from a national perspective, the CMA believes that the single most important reason for the deterioration of the health care system is the significant decline in federal financial support for health care. It is critical that the federal government immediately signal its commitment to Canadians that the health care system is a high priority, and to immediately reinvest in a program that will restore the confidence of Canadians' that the system will be there for them when they need it. Now is the time for the federal government to demonstrate leadership and address the number one concern of Canadians by turning the "vicious cycle" of deficit reduction into a "virtuous cycle" of reinvesting in the health care system. This is not business as usual, and the status quo is not sustainable. IV. A TIME TO RE-ESTABLISH FEDERAL LEADERSHIP IN HEALTH CARE Stabilize the System Canadians, who strongly support a publicly-funded health care system - a conviction shared by the CMA - need to see some leadership from their federal government about how it perceives the future of the health care system unfolding. The failure to re-invest in health care in the last federal budget leaves them confused by the contradiction of seeing the government withdraw funding while at the same time talking about introducing new programs such as home care and pharmacare. Before the federal government can even contemplate future program expansion, it must move quickly to stabilize our current health care system. Canadians have made it very clear where they believe the federal government's spending priorities lie. Seventy-one percent (Angus Reid, November, 1997) want federal cash transfer restored and 81% (Ottawa Sun/Roper, June 1998) of Canadians want the federal government to dedicate more resources to Medicare. The CMA believes strongly that there is an immediate need for a measured, deliberate and responsible approach to re-invest in our health care system. Canadians need to be reassured that the system will be there for them and their families when they need it. To restore access to quality health care for all Canadians, the CMA respectfully recommends: 1. That in order to ensure greater public accountability and visibility, the federal government introduce a health-specific portion of the cash transfers to the provinces and territories. 2. That in addition to the current level of federal cash transferred to the provinces and territories for health care, the federal government restore at a minimum $2.5 billion in cash on an annual basis to be earmarked for health care, effective April 1, 1999. 3. That beginning April 1, 2000, the federal government fully index the total cash entitlement allocated to health care through the use of a combination of factors that would take into account the changing needs of Canadians based on population growth, aging, epidemiology, current knowledge and new technologies, and economic growth. The principles outlined in the above recommendations are fundamental and underscore the importance of establishing an accountable (i.e., linking sources with their intended uses) and visible transfer for federal cash that is targeted for reinvestment into health care. While there is ongoing discussion about the mechanism(s) to reinvest in health care, the minimum federal cash restoration of $2.5 billion on an annual basis into the health care system recognizes the high priority of placing health care on a more sustainable financial footing for the future. This figure is separate from the $5 billion notionally allocated to health care via the current CHST, and is calculated on the basis of the recent historical federal cash allocation (approximately 41%) under EPF and CAP (now the CHST) to health care as a proportion of the $6.0 billion dollars required to restore the CHST cash floor to $18.5 billion (1995/96 level). The recommendations also speak to the necessity of having in place a fully indexed escalator to ensure that the federal cash contribution will continue to grow to meet the future health care needs of Canadians, and with the economy. The escalator formula recognizes that health care needs are not always synchronized with economic growth. In fact, it could be argued that in times of economic hardship (i.e., unemployment, stress, anxiety), a greater burden is placed on the health care system. Taken together, the above recommendations are a targeted approach to reinvesting in health care, and serve to re-establish the federal government's leadership role when it comes to the current and future sustainability of our health care system. It also signals that the federal government is prepared to address, in a focused and strategic approach, Canadians' number one concern - access to quality health care. Finally, it is important to note that in principle the above recommendations are consistent with those of other groups such as the provincial and territorial ministers of finance, the Canadian public and other national health organizations, who are not asking for new resources but an immediate restoration of monies that have been taken out of the federal/provincial/territorial transfer envelope over the past three years. Looking to the Future At the same time that the federal government reinvests to stabilize the health care system, it must also consider the broader spectrum of health care services that must be in place to ensure that Canadians do not fall through the cracks. In addition to the re-investment required to stabilize our Medicare system, there is also an urgent need for investments into other components of the health system. In many ways, this suggests that new transitional funding is required to ensure that as the system evolves, it remains accessible, and can do so with minimal interruption of service to Canadians. Proposed by the CMA, the Health System Renewal Fund, is time limited, sector-specific, and strategically targeted to areas that are in transition. Funding is intended to meet defined need and give the federal government sufficient flexibility in how the funds will be allocated, with full recognition for the investment. The CMA respectfully recommends: 4. That the federal government establish a one-time Health System Renewal Fund in the amount of $3 billion to be disbursed over the three-year period beginning April 1, 1999, for the following areas of need: a. Acute care infrastructure support: assist health institutions to enhance the delivery of a continuum of quality patient care by improving their access to necessary services including new technologies, and modernizing health facilities and upgrading infrastructure. b. Community care infrastructure support: to enable communities to develop services to support the delivery of home and community-based care in the wake of the rapid downsizing of the institutional sector. c. Support Canadians at risk: to provide access to pharmacotherapy and medical devices to those in need, who are not adequately covered by public or private insurance (pending the development of a long-term solution). d. Health information technology: to allow the provinces and territories to put in place the transparent, clinically driven health information infrastructure necessary to support the adequate and appropriate management of access and delivery of health care. In implementing the health information infrastructure scrupulous attention must be paid to privacy and confidentiality issues. The Acute Care Infrastructure Support program is designed to ensure that targeted reinvestments are made in the institutional sector such that it has the necessary physical capacity and infrastructure to deliver quality health care. In a world where downsizing has become the accepted wisdom, health care facilities need to be modernized in terms of new technology and equipment to ensure the full continuum of patient care is available. The Community Care Infrastructure Support program speaks to the important need to develop adequate community-based systems before any reforms are introduced in the acute care sector. It also recognizes that community-based programs should not be implemented at the expense of the acute care sector, but rather, should be designed such that both sectors complement one another and add value to the health care system. The Support Canadians at Risk program focuses on those who with inadequate coverage and have compromised access to needed pharmacotherapy and medical devices. Currently, drug coverage is not universal nor is it comprehensive. In many cases, the working poor, those that are self-employed or employed by small businesses do not have drug coverage (nor are they eligible for government sponsored plans). In other cases, co-payments/deductibles of some public plans are so high that individuals must pay out-of-pocket (e.g., $850 deductible, semi-annually, in Saskatchewan, then 35% co-payment) for all necessary prescription drugs. As a result, this patchwork coverage may inhibit Canadians access to quality care and may place additional demands on the acute care sector. Similarly, Canadians may not have access to medical devices covered by the public and/or private plans. The Health Information Technology program speaks to the critical need to develop and implement a transparent and clinically driven information systems that will support better management, measurement and monitoring of the health care system. At the same time, scrupulous attention must be paid to privacy and confidentiality issues. To this end, the CMA has taken a proactive approach in addressing these issues by developing a health information privacy code. Taken together, our recommendations are a powerful and strategic package. They speak to the need to immediately stabilize the health care system - which is in crisis, and the need to look at the broader spectrum of health care services to ensure that Canadians in need do not fall through the cracks. V. REINFORCING GOOD ECONOMIC POLICY WITH GOOD HEALTH CARE POLICY IN CANADA While the system-wide issues related to the federal role in funding health care is clearly of importance to Canada's physicians, there are also other important issues that the CMA would like to bring to the attention of the Standing Committee on Finance. As mentioned earlier in the brief, good economic policy and good health care policy should go hand-in-hand. They should serve to reinforce, not neutralize, one another. They should not be viewed as one gaining at the expense of the other. Viewed in their proper context, they can be balanced such that policy decisions produce outcomes that are fair to all parties. Tobacco Taxation Policy Smoking is the leading preventable cause of premature mortality in Canada. The most recent estimates suggest that more than 45,000 Canadians die each year due to tobacco use. The estimated economic cost to society from tobacco use in Canada has been estimated between $11 billion to $15 billion 13. Tobacco use directly costs the Canadian health care system $3 billion to $3.5 billion 14 annually. These estimates do not take into account intangible costs such as pain and suffering. CMA is concerned that the 1994 reduction in the federal cigarette tax has had a significant effect in slowing the decline in cigarette smoking in the Canadian population, particularly in the youngest age groups - where the number of young smokers (15-19) is in the 22% to 30% range and 14% for those age 10-14 15. The CMA congratulates the federal government’s February 13, 1998 initiative which selectively increased federal excise taxes on cigarettes and tobacco sticks. This is a first step towards an integrated tobacco tax strategy, and speaks to the importance of strengthening the relationship between good tax policy and good health policy in Canada. The CMA understands that tobacco tax strategies are extremely complex. Strategies need to consider the effects of tax increases on reduced consumption of tobacco products with increases in interprovincial/territorial and international smuggling. In order to tackle this issue, the government could consider a selective tax strategy. This strategy requires continuous stepwise increases to tobacco taxes in those areas with lower tobacco tax (i.e., Ontario, Quebec and Atlantic Canada). The goal of selective increases in tobacco tax is to increase the price to the tobacco consumer over time (65-70% of tobacco products are sold in Ontario and Quebec). The selective stepwise tax increases will approach but may not achieve parity amongst all provinces; however, the tobacco tax will attain a level such that inter-provincial/territorial smuggling would be unprofitable. The selective stepwise increases would need to be monitored so that the new tax level and US/Canadian exchange rates do not make international smuggling profitable. The selective stepwise increase in tobacco taxes can be combined with other tax strategies. The federal government should apply the export tax and remove the exemption available on shipments in accordance with each manufacturers historic levels. The objective of implementing the export tax would be to make cross-border smuggling unprofitable. The federal government should establish a dialogue with the US federal government regarding harmonizing US tobacco taxes with Canadian levels at the factory gate. Alternatively, US tobacco taxes could be raised to a level that when offset with the US/Canada exchange rate differential renders international smuggling unprofitable. The objective of harmonizing US/Canadian tobacco tax levels (at or near the Canadian levels) would be to increase the price of internationally smuggled tobacco products to the Canadian and American consumers. The CMA's comprehensive tobacco taxation strategy is designed to achieve the following objectives: (1) to reduce tobacco consumption; (2) to minimize interprovincial/territorial smuggling of tobacco products; (3) to minimize international smuggling of tobacco products from both the Canadian and American perspective; (4) to reduce and/or minimize Canadian/American consumption of internationally smuggled tobacco products. The CMA recommends: 5. That the federal government follow a comprehensive integrated tobacco tax policy: a. To implement selective stepwise tobacco tax increases to achieve the following objectives: (1) reduce tobacco consumption, (2) minimize interprovincial/territorial smuggling of tobacco products, and (3) minimize international smuggling of tobacco products; b. To apply the export tax on tobacco products and remove the exemption available on tobacco shipments in accordance with each manufacturers historic levels; and c. To enter into discussions with the US federal government to explore options regarding tobacco tax policy, bringing US tobacco tax levels in line with or near Canadian levels, in order to minimize international smuggling. The Excise Act Review, A Proposal for a Revised Framework for the Taxation of Alcohol and Tobacco Products (1996), proposes that tobacco excise duties and taxes (Excise Act and Excise Tax Act) for domestically produced tobacco products be combined into a new excise duty and come under the jurisdiction of the Excise Act. The new excise duty is levied at the point of packaging where the products are produced. The Excise Act Review also proposes that the tobacco customs duty equivalent and the excise tax (Customs Tariff and Excise Tax Act) for imported tobacco products be combined into the new excise duty [equivalent tax to domestically produced tobacco products] and come under the jurisdiction of the Excise Act. The new excise duty will be levied at the time of importation. The CMA supports the proposal of the Excise Act Review. It is consistent with previous CMA recommendations calling for tobacco taxes at the point of production. Support for Tobacco Control Programs Taxation should be used in conjunction with other strategies for promoting healthy public policy, such as public education programs to reduce tobacco use. The Liberal party, recognising the importance of this type of strategy , promised: "...to double the funding for the tobacco control programs from $50 million to $100 million over five years, investing the additional funds in smoking prevention and cessation programs for young people, to be delivered by community organizations that promote the health and well-being of Canadian children and youth." 16 The CMA applauds the federal government's efforts in the area of tobacco use prevention and cessation - particularly its intent to commit $50 million to public education through the proposed Tobacco Control Initiative. However, a time limited investment is not enough. Substantial and sustainable funding is required for programs in prevention and cessation of tobacco use. 17 A possible source for this type of program investment could be tobacco tax revenues or the tobacco surtax. The CMA therefore recommends: 6. That the federal government commit stable funding for a comprehensive tobacco control strategy; this strategy should include programs aimed at prevention and cessation of tobacco use and protection of the public from tobacco's harmful effects. 7. That the federal government clarify its plans for the distribution of the Tobacco Control Initiative funds, and ensure that the funds are invested in evidence-based tobacco control projects and programs. 8. That the federal government support the use of tobacco tax revenues for the purpose of developing and implementing tobacco control programs. Fair and Equitable Tax Policy? - The Goods and Services Tax (GST) and Harmonized Sales Tax (HST) When it comes to tax policy and the tax system in Canada, the CMA is strongly of the view that both should be administered in a fair and equitable manner. This principle-based statement has been made to the Standing Committee on a number of different occasions. While these principles are rarely in dispute, the CMA has expressed its strong concerns regarding their application - particularly in the case of the goods and services tax (GST) and the recently introduced harmonized sales tax (HST) in Atlantic Canada. By designating medical services as "tax exempt" under the Excise Tax Act, physicians are in the unenviable position of being denied the ability to claim a GST refund (i.e., input tax credits - ITCs) on the medical supplies necessary to deliver quality health care, and on the other, cannot pass the tax onto those who purchase such services. This is a critical point when one considers the raison-d'etre of introducing the GST: to be an end-stage consumer-based tax, and having not a producer of a good or a service bear the full burden of the tax. Yet this tax anomaly does precisely that. As a result, physicians are "hermetically sealed" - they have no ability to claim ITCs due to the Excise Tax Act, or pass the costs to consumers due to the Canada Health Act. To be clear, the CMA has never, nor is currently asking for, special treatment for physicians under the Excise Tax Act. However, if physicians, as self-employed individuals are considered as small businesses for tax purposes, then it only seems reasonable that they should have the same tax rules extended to them that apply to other small businesses. This is a fundamental issue of tax fairness. While other self-employed professionals and small businesses claim ITCs, an independent (KPMG) study has estimated that physicians have "overcontributed" in terms of unclaimed ITCs by $57.2 million per year. By the end of this calendar year, physicians will have been unfairly taxed in excess of $480 million. Furthermore, with the introduction of the HST in Atlantic Canada, KPMG has estimated that it will costs physicians an additional $4.686 million per year. As it currently applies to medical services, the GST is bad tax policy and the HST will make a bad situation worse for physicians. Last year, the Standing Committee, in its report to the House of Commons stated: "According to the CMA, the GST is fundamentally unfair to physicians and is a deterrent in recruiting and retaining physicians in Canada. This issue merits consideration and further study". 18 The CMA believes that it has rigorously documented its case and further study is not required - the time has come for concerted action from the federal government to alleviate this tax impediment. There are other health care providers (e.g., dentists, physiotherapists, psychologists, chiropractors, nurses) whose services are categorized as tax exempt. However, there is an important distinction between whether the services are publicly insured or not. Health care providers who deliver services privately have the opportunity to pass along the GST costs through their fee structures. It must be remembered that physicians are in a fundamentally different position given that 99% of their professional earnings come from the government health insurance plans: under the GST and HST, "not all health care services are created equal". There are those who argue that the medical profession should negotiate the GST at the provincial/ territorial level, yet there is no province that is prepared to cover the additional costs that are being downloaded onto physicians as a result of changes to federal tax policy. Nor do these governments feel they should be expected to do so. The current tax anomaly, as it affects the medical profession, was created with the introduction of the GST - and must be resolved at the federal level. As it currently stands for medical services, the GST and HST is not a tax policy that reinforces good health care policy in Canada. The CMA view is not unique. The late Honourable Chief Justice Emmett Hall recognized the principles that underpin the fundamental issue of tax fairness by stating: "That the federal sales tax on medical supplies purchased by self-employed physicians in the course of their practices be eliminated". 19 Even though Mr. Hall's recommendation was made prior to the introduction of the GST and HST, the principles outlined above are unassailable and should be reflected in federal tax policy. Canadian physicians work hard to provide quality health care to their patients within what is a publicly funded health care system. Physicians are no different from Canadians in that they, too, are consumers (purchasers). Why then, they ask, has the medical profession been singled out for such unfair treatment under the GST regime? The CMA respectfully recommends: 9. That health care services funded by the provinces and territories be zero-rated. The above recommendation could be accomplished by amending the Excise Tax Act as follows: (1). Section 5 part II of Schedule V to the Excise Tax Act is replaced by the following: 5. "A supply (other than a zero-rated supply) made by a medical practitioner of a consultative, diagnostic, treatment or other health care service rendered to an individual (other than a surgical or dental service that is performed for cosmetic purposes and not for medical or reconstructive purposes)." (2). Section 9 Part II of Schedule V to the Excise Tax Act is repealed. (3). Part II of Schedule VI to the Excise Tax Act is amended by adding the following after section 40: 41. A supply of any property or service but only if, and to the extent that, the consideration for the supply is payable or reimbursed by the government under a plan established under an Act of the legislature of the province to provide for health care services for all insured persons of the province. Our recommendation fulfils at least two over-arching policy objectives: (1) strengthening the relationship between good economic policy and good health policy in Canada; and (2) applying the fundamental principles that underpin our taxation system (fairness, efficiency, effectiveness), in all cases. Registered Retirement Savings Plans (RRSPs) There are (at least) two fundamental goals of retirement savings: (1) to guarantee a basic level of retirement income for all Canadians; and (2) to assist Canadians in avoiding serious disruption of their pre-retirement living standards upon retirement. Reviewing the demographic picture in Canada, we see that an increasing portion of society is not only aging, but is living longer. Assuming that current demographic trends will continue and peak in the first quarter of the next century, it is important to recognize the role that private RRSPs savings will play in ensuring that Canadians may continue to live dignified lives well past their retirement from the labour force. This becomes even more critical when one considers that Canadians are not setting aside sufficient resources for their retirement. Specifically, according to Statistics Canada, it is estimated that 53% of men and 82% of women starting their career at age 25 will require financial aid at retirement age - only 8% of men and 2% women will be financially secure. In its 1996 Budget Statement, the federal government announced that it froze the dollar limit of RRSPs at $13,500 through to 2002/03, with increases to $14,500 and $15,500 in 2003/04 and 2004/05, respectively. As well, the maximum pension limit for defined benefit registered pension plans will be frozen at its current level of $1,722 per year of service through 2004/05. This is a de facto increase in tax payable. This change in policy with respect to RRSP contribution limits run counter to the White Paper released in 1983 (The Tax Treatment of Retirement Savings), where the House of Commons Special Committee on Pension Reform recommended that the limits on contributions to tax-assisted retirement savings plans be amended so that the same comprehensive limit would apply regardless of the retirement savings vehicle or combination of vehicles used. In short, the principle of "pension parity" was endorsed. Furthermore, in three separate papers released by the federal government, the principle of pension parity would have been achieved between money-purchase (MP) plans and defined benefit (DB) plans had RRSP contribution limits risen to $15,500 in 1988. In effect, the federal government postponed the scheduling of the $15,500 limit for seven years - that is, achieving the goal of pension parity was delayed until 1995. The CMA has been frustrated that ten years of careful and deliberate planning by the federal government around pension reform has not come to fruition, in fact, if the current policy remains in place it will have taken more than 17 years to implement (from 1988 to 2005). As a consequence, the current policy of freezing RRSP contribution limits and RPP limits without making adjustments to RRSP limits to achieve pension parity serves to maintain inequities between the two plans until 2004/2005. This is patently unfair for self-employed Canadians who rely on RRSPs as their sole vehicle for retirement planning. The CMA recommends: 10. That the dollar limit of RRSPs at $13,500 increase to $14,500 and $15,500 in 1999/00 and 2000/01, respectively. Subsequently, dollar limits increase at the growth in the yearly maximum pensionable earnings (YMPE). Under current federal tax legislation, 20% of the cost of an RRSP, RRIF or Registered Pension Plan's investments can be made in "foreign property." The rest is invested in "Canadian" investments. If the 20% limit is exceeded at the end of a month, the RRSP pays a penalty of 1% of the amount of the excess. In its December 1998 pre-budget consultation , the Standing Committee on Finance made the following recommendation (p. 66): "...that the 20% Foreign Property Rule be increased in 2% increments to 30% over a five year period. This diversification will allow Canadians to achieve higher returns on their retirement savings and reduce their exposure to risk, which will benefit all Canadians." A recent study by Ernst & Young, demonstrated that Canadian investors would have experienced substantially better investment returns over the past 20 years with higher foreign content limits. As well, the Conference Board of Canada concluded that lifting the foreign content limit to 30% would have a neutral effect on Canada's economy. The CMA and believes there is sufficient evidence to indicate that Canadians would benefit from an increase in the Foreign Property Rule, from 20% to 30%. The CMA therefore recommends: 11. That the 20% foreign property rule for deferred income plans such as Registered Retirement Savings Plans and Registered Retirement Income Funds be increased in 2% annual increments to 30% over a five year period, effective 1999. As part of the process to revitalize the economy, greater expectations are being placed on the private sector to create employment opportunities. While this suggests that there is a need to re-examine the current balance between public and private sector job creation, the government, nonetheless has an important role to play in fostering an environment that will stimulate job creation. In this context, the CMA, strongly believes that current RRSPs should be viewed as an asset rather than a liability. With proper mechanisms in place, the RRSP pool of capital funds can play an integral role in bringing together venture capital and small and medium-size businesses and entrepreneurs. In this regard, the CMA would encourage the government to explore current regulatory impediments to bring together capital with small and medium-size businesses. The CMA, recommends the following: 12. That the federal government foster economic development by treating RRSP contributions as assets rather than liabilities and by exploring the regulatory changes necessary to ensure increased access to such funds by small and medium-size businesses. Non-Taxable Health Benefits In last year's federal budget, the CMA was encouraged by the federal government's announcement to extend the deductibility of health and dental premiums through private health services plans (PHSP) for the unincorporated self-employed. The CMA believes that this initiative is a step in the right direction when it comes to improving tax fairness. As well, the federal government is to be commended for its decision to maintain the non-taxable status of supplementary health benefits. This decision is an example of the federal government's serving to strengthen the relationship between good tax policy and good health care policy in Canada. If supplementary health benefits were to become taxable, it is likely that young healthy people would opt for cash compensation instead of paying taxes on benefits they do not receive. These Canadians would become uninsured for supplementary health services. It follows that employer-paid premiums may increase as a result of this exodus in order to offset the additional costs of maintaining benefit levels due to diminishing ability to achieve risk pooling. As well, in terms of fairness it would seem unfair to "penalize" 70% of Canadians by taxing supplementary health benefits to put them on an equal basis with the remaining 30%. It would be preferable to develop incentives to allow the remaining 30% of Canadians to achieve similar benefits attributable to the tax status of supplementary health benefits. The CMA therefore recommends: 13. That the current federal government policy with respect to non-taxable health benefits be maintained. Health Research in Canada At the same time that our health care system has been de-stabilized, so too has the role of health research in Canada. In response, the federal government announced in its 1998 budget that it would increase funding levels for the Medical Research Council of Canada (MRC) from $237.5 million (1997/98), to $267 million (1998/99), $270 million (1999/00) and $276 million (2000/01). While this is a step in the right direction, the $134 million over three years represents for the most part a restoration of previously cut funding - only $18 million would be considered new money. Furthermore, when compared against other countries, Canada does not fare well. Of the G-7 nations for which recent data were available, Canada ranks last in per capita spending for health research. France, Japan, the United States and the United Kingdom spend between 1.5 and 3.5 times more per capita than Canada. 20 In what is increasingly a knowledge-based world, the federal government must be reminded that a sustained and substantial commitment to health research in required. The CMA therefore recommends: 14. That the federal government establish a national target (either in per capita terms or as a proportion of total health spending), and an implementation plan for health research and development spending including the full spectrum of basic biomedical to applied health services research, with the objective of improving Canada's position relative to other G-7 countries. Brain Drain and Tuition Deregulation In June, 1998, the CMA met with the Standing Committee on Finance to discuss the issue of "brain drain" in Canada. At that time, the CMA expressed its serious concerns over the recent tuition deregulation policy in Ontario and its subsequent impact on the career choices of new medical graduates. Specifically, the CMA officially decries tuition deregulation in Canadian medical schools and believes that governments should increase funding to medical schools to alleviate the pressures driving tuition increases; that any tuition increase be regulated and reasonable; and that financial support systems be in place in advance of, or concomitantly with, any tuition increase. These measures will foster the education and training of a diverse population of health care givers, and will support culturally and socially sensitive health care for all Canadians. As new physicians graduate with substantial and growing debt loads, they will be attracted to more lucrative positions in order to repay their debts - particularly positions in the United States. As a consequence, tuition deregulation policies will have a direct and detrimental impact when it comes to retaining our best and brightest young physicians in Canada. The CMA is currently in the process of developing a position paper on this issue. VI. SUMMARY OF RECOMMENDATIONS With the future of access to quality health care for all Canadians at stake, the CMA strongly believes that the federal government must demonstrate that it is prepared to re-establish its leadership role and re-invest in the health care system that all Canadians cherish and closely identify with. The CMA therefore makes the following recommendations to the Standing Committee on Finance in its deliberations. Stabilize the System 1. That in order to ensure greater public accountability and visibility, the federal government introduce a health-specific portion of the cash transfers to the provinces and territories. 2. That in addition to the current level of federal cash transferred to the provinces and territories for health care, the federal government restore at a minimum $2.5 billion in cash on an annual basis to be earmarked for health care, effective April 1, 1999. 3. That beginning April 1, 2000, the federal government fully index the total cash entitlement allocated to health care through the use of a combination of factors that would take into account the changing needs of Canadians based on population growth, aging, epidemiology, current knowledge and new technologies, and economic growth. Looking to the Future 4. That the federal government establish a one-time Health System Renewal Fund in the amount of $3 billion to be disbursed over the three-year period beginning April 1, 1999, for the following areas of need: a. Acute care infrastructure support: assist health institutions to enhance the delivery of a continuum of quality patient care by improving their access to necessary services including new technologies, and modernizing health facilities and upgrading infrastructure. b. Community care infrastructure support: to enable communities to develop services to support the delivery of home and community-based care in the wake of the rapid downsizing of the institutional sector. c. Support Canadians at risk: to provide access to pharmacotherapy and medical devices to those in need, who are not adequately covered by public or private insurance (pending the development of a long-term solution). d. Health information technology: to allow the provinces and territories to put in place the transparent, clinically driven health information infrastructure necessary to support the adequate and appropriate management of access and delivery of health care. In implementing the health information infrastructure scrupulous attention must be paid to privacy and confidentiality issues. Tobacco Taxation Policy 5. That the federal government follow a comprehensive integrated tobacco tax policy: a. To implement selective stepwise tobacco tax increases to achieve the following objectives: (1) reduce tobacco consumption, (2) minimize interprovincial/territorial smuggling of tobacco products, and (3) minimize international smuggling of tobacco products; b. To apply the export tax on tobacco products and remove the exemption available on tobacco shipments in accordance with each manufacturers historic levels; and c. To enter into discussions with the US federal government to explore options regarding tobacco tax policy, bringing US tobacco tax levels in line with or near Canadian levels, in order to minimize international smuggling. Support for Tobacco Control Programs 6. That the federal government commit stable funding for a comprehensive tobacco control strategy; this strategy should include programs aimed at prevention and cessation of tobacco use and protection of the public from tobacco's harmful effects. 7. That the federal government clarify its plans for the distribution of the Tobacco Control Initiative funds, and ensure that the funds are invested in evidence-based tobacco control projects and programs. 8. That the federal government support the use of tobacco tax revenues for the purpose of developing and implementing tobacco control programs. Goods and Services Tax (GST) 9. That health care services funded by the provinces and territories be zero-rated. Registered Retirement Savings Plans (RRSPs) 10. That the dollar limit of RRSPs at $13,500 increase to $14,500 and $15,500 in 1999/00 and 2000/01, respectively. Subsequently, dollar limits increase at the growth in the yearly maximum pensionable earnings (YMPE). 11. That the 20% foreign property rule for deferred income plans such as Registered Retirement Savings Plans and Registered Retirement Income Funds be increased in 2% annual increments to 30% over a five year period, effective 1999. 12. That the federal government foster economic development by treating RRSP contributions as assets rather than liabilities and by exploring the regulatory changes necessary to ensure increased access to such funds by small and medium-size businesses. Non-Taxable Health Benefits 13. That the current federal government policy with respect to non-taxable health benefits be maintained. Health Research in Canada 14. That the federal government establish a national target (either in per capita terms or as a proportion of total health spending), and an implementation plan for health research and development spending including the full spectrum of basic biomedical to applied health services research, with the objective of improving Canada's position relative to other G-7 countries. 1 Angus Reid, February, 1998. 2 Angus Reid, February, 1998. 3 Canadian Medical Association. January 1998 Physician Resource Questionnaire. 4 39th Annual Premiers’ Conference, Saskatoon Saskatchewan, August 5-7, 1998. Press Communique. 5 Rock A. Speech to the Canadian Medical Association’s 130th General Council Victoria, Aug 20, 1997. 6 The Budget Plan, 1998. Building Canada for the 21st Century, February 24, 1998. 7 The tax point transfer refers to the dollar value of ?tax points? that were negotiated with the federal government and the provinces. Specifically, where the federal government reduced personal and corporate income tax rates, the ?tax room? that was created was then occupied by the provinces. This is an important point because even though the federal government collects taxes on behalf of the provinces (with the exception of Quebec), it is argued that the value of the tax point transfer belongs to the provinces and is not considered as a true “federal contribution”. The last time this issue was negotiated was in 1965. 8 Thomson A. Federal Support for Health Care - A Background Paper. Health Action Lobby, Ottawa, 1991. 9 Thomson, A., Diminishing Expectations - Implications of the CHST, [report] Canadian Medical Association, Ottawa. May, 1996. 10 Federal Department of Finance. 11 Thomson A. Federal Support for Health Care - A Background Paper. Health Action Lobby, Ottawa, 1991. 12 Currently, the CHST cash entitlement has an escalator attached to it, however, it is scheduled to begin in 2000/01, 2001/02, 2002/03, at a rate of GDP- 2% (year 1), GDP-1.5% (year 2), and GDP-1% (year 3). 13 Health Canada, Economic Costs Due to Smoking (Information Sheet). Ottawa: Health Canada, November 1996. 14 Health Canada, Economic Costs Due to Smoking (Information Sheet). Ottawa: Health Canada, November 1996. 15 Health Canada, Youth Smoking Behaviour and Attitudes (Information Sheet). Ottawa: Health Canada, November 1996. 16 Liberal Party, Securing Our Future, Liberal Party of Canada, Ottawa, 1997. p. 77. 17 In California, between 1988 and 1993, when the state was carrying on an aggressive public anti-smoking campaign, tobacco consumption declined by over 25%. Goldman LK, Glantz SA. Evaluation of Antismoking Advertising Campaigns. JAMA 1988; 279: 772-777. 18 Report of the Standing Committee on Finance. December, 1997. 19 Hall Emmett (Special Commissioner). Canada?s National-Provincial Program for the 1980s, p. 32. 20 Organization for Economic Cooperation and Development. OECD Health Data 97. Paris: OECD, 1997.
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CMA Presentation to the House of Commons Standing Committee on Health : Statutory review of the 10-Year Plan to Strengthen Health Care

https://policybase.cma.ca/en/permalink/policy9135
Last Reviewed
2020-02-29
Date
2008-05-27
Topics
Health systems, system funding and performance
  1 document  
Policy Type
Parliamentary submission
Last Reviewed
2020-02-29
Date
2008-05-27
Topics
Health systems, system funding and performance
Text
The CMA appreciates the opportunity to present to the Standing Committee on Health today. My presentation will focus on: 1. Wait Times 2. Health Human Resources; and 3. Patient Focused Care Wait Times In regard to the issue of wait times, I would echo the two main points of my colleagues from the Wait Time Alliance: * First, while progress is being made on wait times, that progress is limited and not consistent across the country; and second, * Health workforce and infrastructure capacity shortages remain the primary barriers to effectively addressing wait times. Wait times don't only exact a heavy human toll - they also carry severe economic costs. A CMA-commissioned report released earlier this year found that the economic cost of having patients wait longer than medically recommended was $14.8 billion in 2007. That stunning total was for just four of the five procedures identified as priorities in the 10-year plan - joint replacement, diagnostic imagining and cataract and bypass surgery - and it was only for one year. Over a million Canadians continue to suffer on wait lists because of deficiencies in our system. This is unacceptable. We need to "break the back" of wait times for the sake of our patients and for the economic health of Canada. This will require: * More federal leadership, not less; * A revolutionary change in the "focus" of our health care system; and * Substantial investments. Health Human Resources The 10-Year Plan to Strengthen Health Care acknowledged the need to increase the supply of health care professionals in Canada. However, not enough progress has been made. Canada is 26,000 doctors short of the average of developed countries, and we now rank a lowly 24th among OECD countries in doctors per population. A poll released today by the CMA found that Canada's doctor shortage ranked second only to the economy as a top public issue. In this same poll, 91% of Canadians say having a plan to address the doctor shortage will influence their vote in the next federal election. Federal political parties who ignore this issue in the next election could pay a price at the polls. In the 10-year plan to strengthen health care, $1-billion was set aside for the last four years (2010-2014) of the agreement. We can't afford to wait that long. This funding should be immediately fast-tracked to focus on the three priority areas in the CMA's "More Doctors. More Care" Campaign: * One, expanding health professional education and training capacity; * Two, ensuring self sufficiency in health human resources by investing in long-term health human resource planning; and. * Three, investing in health information technology to make our health care system more responsive and efficient. In terms of IT, we should be ashamed that we only spend a third of the OECD average on IT in our hospitals. Canada's poor record in avoidable adverse effects is, in part, due to our system's inability to share available information in a timely manner. Patient Focused Care Many countries have systems that provide universal care, have no wait lists and cost the same or less to run as our system does. Wait lists can and must be eliminated in Canada. The momentum to do just that depends simply on making the system work for patients, not on forcing patients to work the system. We must reposition patients to the centre of our health-care system, which requires that we move beyond block funding or global budgets for health institutions. We need a system where funds follow the patient - patient-focused funding. Block funding blocks access. Patient-focused funding will increase productivity, lead to greater efficiencies and reduce wait lists. A patient will become a value to an institution, not a cost. Canada remains the last country in the developed world to fund hospitals with block funding. In England, patient-focused funding helped eliminate wait lists in less than four years. Conclusion So, my question to the Committee is why do we wait? Why do we continue to keep patients on wait lists when research shows it costs a lot less to cut wait times then it does to have them? Why do we not make the necessary reforms and investments to provide Canadians with timely access to quality care? Thank you.
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CMA's letter to Mr. James Rajotte, MP Chair, Standing Committee on Industry, Science and Technology: Review of the service sector in Canada

https://policybase.cma.ca/en/permalink/policy9114
Last Reviewed
2020-02-29
Date
2008-02-23
Topics
Health human resources
Health systems, system funding and performance
  1 document  
Policy Type
Parliamentary submission
Last Reviewed
2020-02-29
Date
2008-02-23
Topics
Health human resources
Health systems, system funding and performance
Text
On behalf of the Canadian Medical Association (CMA), I want to thank you for the opportunity to provide the following information to the House of Commons Standing Committee on Industry, Science and Technology during its review of the service sector in Canada. The committee's study of the strengths and challenges facing this sector, overall employment percentage, overall average of salaries across the sector its impact on Canada's overall economy and the role of the Government of Canada in strengthening this sector comes at an opportune time. CANADA'S HEALTH SERVICES SECTOR Canada's health services sector is facing a critical shortage of physicians and other health care professionals and the CMA and our over 67,000 physician members are pleased to have the opportunity to present practical solutions within the jurisdiction of the federal government - working collaboratively with provincial/territorial governments and other health system stakeholders. Health care delivery in Canada is a $160 billion industry, representing over 10% of our country's gross domestic product (GDP).1 The 30,120 physicians' offices across Canada make important contributions to our economy. In 2003, the latest year for which data are available, offices of physicians employed 142,000 Canadians and contributed $11.6 billion to the Canadian economy.2 This represents almost 39 per cent of all Health Service Delivery establishments, and almost 11% of all HSD employees. As a standard measure of economic productivity, physician offices report the highest levels of GDP per employee within the Health Service Delivery sector. On this measure, they are approximately twice as productive as other components of Health Service Delivery. THE CHALLENGE There are simply not enough physicians to continue providing the quality health care that Canadians expect and deserve. Here are the facts: - Almost 5 million Canadians do not have access to a family physician; - By 2018 an additional 4.5 million Canadians could be without a doctor; - Canada ranks 24th in Organisation for Economic Co-operation and Development (OECD) nations in terms of physicians-per-population ratio. Canada would need 26,000 more doctors right now to meet the OECD average; - Canada spends only a third of the OECD average on information technology (IT) and diagnostic equipment in our hospitals; and - Canada has the highest hospital occupancy rate of all OECD countries and among the highest waits for access to specialty care services. The lack of physicians and other health care providers has resulted in restricted access to health care services and the growth of wait times for necessary medical procedures. In January 2008, CMA released new research by the Centre for Spatial Economics that proved that, in addition to the human health cost, waiting for care results in dramatic and excessive costs to our economy. Researchers addressed just four priority areas targeted in the 2004 First Ministers Health Accord. They used government and other data to determine how many Canadians were waiting longer than the maximum medical consensus established by the Wait Time Alliance. Selected for analysis were: joint replacement, cataract surgery, heart bypass grafts, and MRI scans. Costs, as calculated for all provinces varied from $2,900 to over $26,000 per patient. The cumulative cost of waiting in 2007, for treatment in just 4 areas, was $14.8 billion. This reduced economic activity lowered government revenues in 2007 by $4.4 billion. That is equivalent to over 1/3rd of the total Ontario health budget. The reduction in economic activity included the impact of the patient's inability to work while waiting, and direct losses from decreased production of goods and services, reduced income, and lowered discretionary spending. It is important to note that the figure of 14.8 billion dollars is based only on patients that exceed designated maximum waiting times in just 4 clinical areas. In the example of hip replacements, the research only factored in costs for waits that exceed 6 months. Of those waiting longer than the maximum recommended time, average waits were 1 year for hip and knee replacement surgery, 7 months for cataract surgery, and twice maximum for heart bypass surgery. Those who didn't make the MRI target waited an average of 12 weeks. Reduced economic activity included informal caregiver costs. These costs are generated when caregivers reduce work hours to care for family members on wait lists, or attend appointments with family members. Patients languishing on wait lists also incur additional costs for drug and other treatments that timely care would eliminate. Estimates in this study are extremely conservative. They address only the wait time to treatment after a specialist's consultation and recommendation. And exclude the growing, and significant costs of waiting to see the GP or specialist. They do not include anyone who is not working. They do not include the costs, short and long term, of the deterioration that occurs while waiting. THE SOLUTIONS To solve Canada's doctor shortage, the CMA believes governments must: - Adopt a long-term policy of self-sufficiency to provide Canadians with the health care professionals they need when and where they need them; - Establish a dedicated health human resource renewal fund to educate, retain and enhance the lives of health care professionals; and - Invest in health technology, infrastructure and innovation to make our health care system more responsive and efficient. SELF-SUFFICIENCY Over the past decade, there have been increasing concerns that Canada is not producing an adequate number of health providers to meet the growing demand for health services - now and into the future. These concerns have been consistently registered by physicians, nurses, pharmacists, technicians, in addition to other groups that represent other providers and the institutional and heath facilities community. Furthermore, the policy challenges related to health human resources (HHR) have been identified in several seminal reports - including the Royal Commission on the Future of Health Care in Canada, the Standing Senate Committee on Social Affairs, Science & Technology, and the Health Council of Canada.3 A growing number of health providers are looking to retire over the next decade (or leave the health system all together) relative to the number of trainees who are entering the health system, and at a time where a growing number of Canadians will be turning to the health system for diagnosis and treatment. Over 6% of physicians who responded to the National Physician Survey 20074 said they plan to retire from clinical practice and 1% plan to permanently leave practice for other reasons in the next 2 years. The effect of these changes could mean that, as the baby boom generation gets older, over 4,000 physicians will cease their medical practice within the next 2 years, making it even more difficult for Canadians to find a family physician. At the same time, the HHR challenges facing Canada's health care system are not unique to our country - over the next decade all western developed countries can expect intensified global competition for talent when it comes to health providers.5 While there are, no doubt, other provider groups who are also concerned about the future supply of health providers, there is a growing national consensus that, in addition to the primary role that the provinces and territories play in supporting the training of health providers across the country, there is a significant, catalytic and strong complementary role for the federal government in the area of health human resources. CMA, like many health care organizations, is of the view that there is a legitimate role for the federal government to strengthen its working relationship with the provinces and territories, and health providers through the creation of a time-limited, issue-specific and strategically-targeted fund to accelerate training capacity in the health system. The World Medical Association's ethical guidelines for international recruitment of physicians16 (2003), fully supported by the CMA, recommend that every country "should do its utmost to educate an adequate number of physicians, taking into account its needs and resources. A country should not rely on immigration from other countries to meet its need for physicians."7 However, in reality Canada continues to rely heavily on recruitment of internationally educated health professionals. Approximately one-third of the increase in physician supply each year is due to International Medical Graduates (IMGs) who are either recruited directly to practice or who have taken significant postgraduate medical training in Canada. In nursing, the number of internationally educated nurses applying for licensure is increasing rapidly, almost tripling from 1999 to 2003. Previous recommendations of the CMA to the House of Commons included improved medium- to longer-term supply projection models; sufficient opportunities for Canadians to train for health professional careers in Canada; and integration of international graduates, who are permanent residents or citizens of Canada, into practice. The CMA recognizes that professionals are working in an increasingly global world in terms of the exchange of scientific information, mutual recognition of qualifications between countries and the movement of people. The greatest barrier to enhancing Canada's ability to become more self-sufficient, in terms of physician resources, is the capacity of our medical schools. Despite recent increases in enrolment, Canada continues to turn away approximately 3 equally qualified students for every 1 that is accepted into an undergraduate medical program. This has resulted in over 1500 Canadian students, with the financial means to do so, who are training in medical schools outside of Canada. INTERNATIONAL MEDICAL GRADUATES In the larger context, Canada's current fertility rate is not sufficient to support self-sufficiency in general in relation to any professions. And, while self-sufficiency in the production of physicians is a desirable goal, it is also important to promote the international exchange of teaching and research, particularly in an increasingly global society. In this regard, IMGs should be considered as a planning component for a sustainable Canadian physician workforce. Historically IMGs have entered the practice of medicine through a variety of routes, which most typically include a recognized period of post-MD training in Canada. CMA's best estimate is that there are about 400 IMGs newly licensed to practice in Canada each year who have not completed postgraduate training in Canada. In addition, there are another 300 or so who are exiting Canadian postgraduate training programs and heading into practice. In fact, for the past few years, the College of Physicians and Surgeons of Ontario has licensed more IMGs than new Ontario medical graduates. In recent years, there have been an increasing number of opportunities for IMGs already living in Canada to achieve the required credentials for licensure. The number of ministry-funded IMG postgraduate residents has more than tripled in the past seven years from 294 to 1065 trainees. In 2007, there were almost 1500 IMGs who were qualified to compete in the Canadian Resident Matching Service (CaRMS) match. By the end of the second round, close to 300 had matched and about 60 were placed through other provincial programs. Recommendation The federal government should make a clear policy commitment to increasing self-sufficiency in the education and training of health professionals in Canada that would incorporate the following. - Short term - increase number of community preceptors to train Canadian graduates and assess internationally educated health professionals already living in Canada. Recognition of the time and value of community teaching is needed. - Medium term - support increased capacity for academic health science centres and other institutions that train health professionals. - Long term - creation of new academic health science centres to increase capacity for self-sufficiency. REPATRIATING CANADIAN DOCTORS WORKING ABROAD It is known that there are thousands of Canadian-trained health professionals practising in the United States and abroad. Between 1991 and 2004, almost 8,000 physicians left Canada (although some 4,000 returned for a net loss of 4,000).8 Of this number, roughly 80% went to the US.9 During the 1990s, approximately 27,000 nurses migrated from Canada to the US.1011 A more recent indicator of nursing outmigration is that in 2006, 943 Canadian-trained Registered Nurses and Licensed Practical Nurses wrote the US licensing board examination for the first time.12 Data for other health professional disciplines are not readily available. In 2007, with the assistance of the American Medical Association, the Canadian Medical Association (CMA) surveyed all (n=5,156) Canadian-trained physicians practicing in the US who were age 55 or under, with regard to the likelihood of their return to Canada and the importance of various factors that might be incentives to return. A 32% response rate was achieved with a single mailing with no follow-up - this is considered exceptionally high. While only 13% of respondents indicated that they were likely or very likely to return to Canada, a further 25% were neutral in their opinion. What is more telling is that more than one-half of respondents indicated that they would be willing to be contacted by CMA to explore practice opportunities and provided their contact information for this purpose. When asked about a range of potential incentives to return to Canada, 57% agreed that a relocation allowance would be somewhat or very important.13 It must be stressed, however, that it is clear from the results that a number of factors would need to be taken into consideration, such as practice opportunities. This would also be true of other disciplines; in the case of nursing, nurses will only come back for full-time jobs and healthy work environments.14 Nonetheless, expatriate Canadian medical graduates should be good candidates for recruitment on the basis of the greater likelihood that they will meet Canadian standards for full medical licensure, and it is expected that this would also apply to nursing and other disciplines. As well, significant progress has been made in restoring and adding capacity to our medical schools but, to achieve self-sufficiency, much more needs to be done. For example, we must try and repatriate Canadian medical students and doctors who are studying and working abroad. There are currently some 1500 Canadian medical students and residents training abroad, we must act now, before things get worse. During that past few years there have been efforts to enhance national coordination in the health human resources arena. One area of national focus has been the integration of International Medical Graduates, since extended to nursing and other disciplines. There have been several initiatives undertaken in this area such as the establishment of the Canadian Information Centre for International Medical Graduates15 which provides a clearinghouse of information and links to provincial/territorial jurisdictions. Relocation grants, from $10,000 up to $20,000 could be offered to Canadian-trained physicians practising in the US. It is suggested that advertising be concentrated in and around US cities where Canada maintains a consulate/office (in states with a significant concentration with recruitment candidates) and in major national and selected state health professional journals. The cost of a repatriation secretariat is estimated at $162,500 per year. Assuming that 1,500 health professionals are recruited back over the 3-year period, the total cost would range from $21.5 million to $36.5 million. This would further translate to a per recruit cost that ranges from $14,325 to $24,325. Even at the high end of the range this would be cost-effective as compared to the total cost of training a practice-entry level graduate of any licensed health professional discipline in Canada. Recommendation In light of the foregoing, the CMA has recommended that the federal government should establish a Health Professional Repatriation Program in the amount of $30 million over 3 years that would include the following: - secretariat within Health Canada that would include a clearinghouse function on issues associated with returning to Canada such as licensure, citizenship and taxation; - An advertising campaign in the US to encourage health professionals practicing south of the border to return home; and - A program of one-time relocation grants for health professionals returning to active practice in Canada. NATIONAL HEALTH HUMAN RESOURCES INFRASTRUCTURE FUND The implementation of Medicare in Canada in the 1960s required a major investment in the capacity to train more health professionals. The 1966 Health Resources Fund Act played a key role in enabling a significant expansion in training capacity across the provinces for a range of health professionals. Forty years later, Canada faces growing shortages across most health disciplines. Clearly another giant step up is required in the human and physical infrastructure needed to train health professionals if Canadians are to have timely access to care. During the years of fiscal famine of the 1990s, health professional enrolment was either reduced (e.g., 10% in the case of medicine) or flat-lined. While there have been increases since 2000, we are about to face the double impact of both an aging population as the first of the baby boomers reach 65 in 2011 and aging health professions. For example, more than 1 out of 3 physicians (35%) are aged 55 or older. As mentioned, as many as 4,000 physicians are expected to retire in the next 2 years. If we are going to have sufficient numbers of health providers to meet the needs of the next few decades, it is imperative to expand the human and physician infrastructure capacity of our health professional education and training system. The federal investments in health human resources over 2003-2005 of some $200 million have been welcome, but fall far short of what is needed. It is proposed that the federal government implement a National Health Human Resources Infrastructure Fund in the amount of $1 billion over 5 years that would be made available to the provinces/territories on an equal per capita basis, and awarded through a competitive process that would include federal/ provincial/territorial representation with consultation/engagement of health professional organizations. The fund would address the following elements: 1. The direct costs of training providers and developing leaders (e.g., cost of recruiting and supporting more community- based teachers/preceptors). 2. The indirect or infrastructure costs associated with the educational enterprise (e.g., physical plant [housekeeping, maintenance]; support for departments [information systems, library resources, occupational health, etc.]; education offices, and the materials and equipment necessary for clinical practice and practical training. 3. Resources that improve the country's overall data management capacity when it comes to health human resources, and in particular, facilitate the ability to model and forecast health human resource requirements in the face of the changing demand for health services. Clearly it would be necessary to develop guidelines around the types of expenditures that would be eligible as was done for the 1966 Health Resources Fund, and more recently for the Medical Equipment Fund II. CMA Recommendation The federal government should establish a National Health Human Resources Fund in the amount of $1 billion over 5 years to expand health professional education and training capacity by providing funding to support the: - direct costs of training providers - indirect or infrastructure costs associated with the educational enterprise - resources that improve Canada's data collection and management capacity in the area of health human resources. HEALTH INNOVATION More than 85% of the health care delivered in Canada occurs within the community. This is the most under-invested segment of the health care delivery system in terms of information technology. Dr. Brian Postl in his June 2006 wait-time report16 to the federal government noted health information technology is essential in improving wait times. He quantified the investment needed at $2.4 billion with the largest portion of this investment ($1.9 billion) targeted to automating physician offices, which are located at the front line of care in community settings and are key to managing and resolving the wait time issue in Canada. Why invest in physician office automation? Because it will lead to improved productivity from the provider community through more efficient resource usage and through improved coordination in the delivery of care; it will enable labour mobility of health care workers through portability of records; it will support the wait time agenda by improving the flow of timely information; it will build an electronic infrastructure platform to enhance patient care and health research and will provide a direct financing vehicle for the federal government to influence and shape the health care sector. The federal government has made similar types of infrastructure investment. The CFI Program was established to fund research infrastructure, which consists of the state-of-the-art equipment, buildings, laboratories and databases required to conduct research. Investing in EMR infrastructure will lead to the creation of state of the art clinical environments across Canada, electronic data base of health information and the foundational underpinnings of a health information network to support enhanced population health and health research. Under this scenario the federal contribution would provide a direct benefit to physicians without any need for provincial or territorial involvement. Second, the federal government could use existing government machinery to manage the program. Third, the federal contribution to infrastructure would only flow after a physician has introduced an EMR into his/her clinic ensuring that the funding is directly tied to building the EMR infrastructure platform. The recent National Physician Survey notes that some progress is being made across the country to automate community clinics. However without incentives the adoption trend will be incremental and extend over a further 20-year time frame. Financial incentives can shorten the timelines since it addresses one of the main adoption barriers physicians identify.17 Diffusion theory18 of new technologies into any sector of the economy demonstrates that without appropriate incentives it will take approximately 25 years the technology to reach the saturation point of integration. It is estimated that a financial incentive can shorten this timeline by 15 years. Recommendation The federal government, over a 5-year time frame, should provide a full tax credit to any physician who takes the steps to automate his or her clinical office. The tax credit would only apply to 1-time costs to establish a state of the art clinical environment. It is estimated, on average, 1-time costs would be $22,000. Total costs of the program if fully subscribed would amount to $880 million. CONCLUSION The health services sector makes significant contributions to the Canadian economy, both in terms of direct stimulus and by keeping Canadians healthy and productive. However, Canada's health services sector is facing a critical shortage of physicians and other health care professionals. By: - Adopting a long-term policy of self-sufficiency to provide Canadians with the health care professionals they need when and where they need them; - Establishing a dedicated health human resource renewal fund to educate, retain and enhance the lives of health care professionals; - Investing in health technology, infrastructure and innovation to make our health care system more responsive and efficient; the federal government, in partnership with provincial/territorial governments and other health system stakeholders can strengthen this sector. A strong health services sector means healthy Canadians and a vibrant Canadian economy. Again, on behalf of the Canadian Medical Association, Canada's doctors appreciate the opportunity to provide information to the Committee. Sincerely, Brian Day, MD President, Canadian Medical Association 1 National Health Expenditure Trends, 1975-2007. Canadian Institute for Health Information. 2007 2 Source: Business Register (STC 2003) and TIM (Informetrica Limited) 3 The Royal Commission on the Future of Health Care in Canada, November 2002. Senate Standing Committee on Social Affairs, Science & Technology, October 2002. The Health Council of Canada "Modernizing the Management of Health Human Resources in Canada: Identifying Areas for Accelerated Change: November 2005. 4 The National Physician Survey is a major ongoing research project conducted by the College of Family Physicians of Canada, Canadian Medical Association and Royal College of Physicians and Surgeons of Canada that gathers the opinions of all physicians, 2nd year medical residents and medical students from across the country. It is the largest census survey of its kind and is an important barometer of where the country's present and future doctors are on a wide range of critical issues. 5 The Economist, The Battle for BrainPower - A Survey of Talent, October 7, 2006. 7 World Medical Association. The World Medical Association Statement on Ethical Guidelines for the International Recruitment of Physicians. Geneva: The World Medical Association; 2003. Available: www.wma.net/e/policy/e14.htm 8 Canadian Institute for Health Information. 2. Canadian Institute for Health Information. 10 Zaho J, Drew D, Murray T. Barin drain and brain gain: the migration of knowledge workers from and to Canada. Education Quarterly Review 2000;6(3):8-35. 12 Little L, Canadian Nurses Association, personal communication, January 8, 2008. 13 Buske L. Analysis of the survey of Canadian graduates practicing in the United States. October 2007. http://www.cma.ca/multimedia/CMA/Content_Images/Policy_Advocacy/Policy_Research/US_survey_ver_4.pdf. Accessed 02/04/08. 14 Little L, Canadian Nurses Association, personal communication, January 28, 2008. 15 www.img-canada.ca 16 Postl, B. Final Report of the Federal Advisor on Wait Times. Ottawa: Minister of Health Canada, Health Council of Canada; 2005. 17 Canadian Medical Association/Canada Infoway. Physician Technology Usage and Attitudes Survey. Ottawa: CMA/CanadaInfoway; 2005. Available: www.cma.ca/index.cfm/ci_id/49044/la_id/1.htm (accessed 8 Jan 2008). 18 Bower, Anthony. The Diffusion and Value of Healthcare Information Technology. Santa Monica (CA): RAND Corporation; 2005
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Improving access to world-class health care by accelerating health information technology investments: CMA's 2009 pre-budget brief to the Standing Committee on Finance

https://policybase.cma.ca/en/permalink/policy9399
Last Reviewed
2020-02-29
Date
2008-08-15
Topics
Health human resources
Health systems, system funding and performance
  1 document  
Policy Type
Parliamentary submission
Last Reviewed
2020-02-29
Date
2008-08-15
Topics
Health human resources
Health systems, system funding and performance
Text
By many measures Canada's health care system is underperforming. One symptom of this weak performance are exceedingly long wait times that have an impact on care and cost patients, the system and governments money1. There are a number of responses to this poor performance including increasing the supply of health human resources2. Another response is to maximize the resources we have on the front lines and work smarter through information technology. This productivity approach is aligned with the assumptions set out in the federal government's Advantage Canada strategy. This strategy involves principally a 'knowledge advantage' and an 'infrastructure advantage'. Consequently, the Canadian Medical Association (CMA) is recommending that the federal government make a strategic "strings attached" $570-million investment to create an interconnected health information technology network3 through a Health Information System Transition Fund and time-limited accelerated IT tax incentives. This investment aims to integrate all Canadian patient health care records, an effort that will take time. However, there are foundations upon which to build thanks to federal government investments - most recently in providing $400 million for wait-time related health information systems. But for these investments to bear fruit further connectivity and integration is vital. In other words, our current system is like having an ATM card that only works at the bank's head office. We believe that additional investments must concentrate on connecting patient records in physician offices with hospitals and medical laboratories. Physicians also believe in accountability, and suggest investments should not be made unless the clinical community confirms a high level of system integration. The CMA recommends that the federal government should invest $570 million over five years in an interconnected pan-Canadian health information system that includes: => A $225 million, 5-year Health Information System Transition Fund aimed at change management training and support to convert 26-million patient records in 36,000 physician offices and community care facilities into interoperable electronic records across Canada. => $305 million for a 3-year time-limited and accelerated Capital Cost Allowance for software and hardware costs related to health information technologies that connect patient records from physician offices to laboratories and hospitals. => $10 million to sponsor a cross-country education campaign to inform Canadians of the health and system benefits of e-health connectivityi. => $2 million annually for Canada Research Chairs to promote and demonstrate the value of interconnectivity in health information between the faculties of Medicine, Management and Engineering. The federal government must also encourage provinces to increase their support of these initiatives and work to reduce the barriers to health information system interfacing, by ensuring patient record systems use similar codes in labs, hospitals and physician offices. Federal government guidance, encouragement and cooperation with the provinces is integral to making these connectivity investments a success. It is time that the federal government helped finish the job of health information system connectivity. A health information network will improve patient outcomes, system efficiency, increase accountability and save billions of dollars. 1. Why advance e-health interconnectivity now? Our health system e-performance is poor Both national and international studies confirm that Canada lags behind nearly every major industrial country when it comes to health information technology (Figure 8). The impact of this underinvestment is longer wait times, poorer quality, and a severe lack of financial accountability especially of federal dollars. Investments in connectivity are needed now because Canada's health care system compares poorly in both value and efficiency compared to other countries. The Conference Board of Canadaii, the OECDiii, the World Health Organizationiv, the Commonwealth Fundv, and the Frontier Centre for Public Policy all rate Canada's health care system poorly in terms of "value for money" as well as efficiency. Benchmarking health information connectivity-where we stand, where we must go According to the 2007 National Physician Survey, just 30% of physicians have an electronic interface with a medical laboratory or diagnostic imaging facility, while fewer than 5% have such an interface with a pharmacy/pharmacistvi. Imagine if just 30% of Canadian banks had ATMs throughout the country? This is a difference of not only convenience, but quality and cost savings. In comparison, Denmark and New Zealand have near 100% use of electronic medical records (EMRs) in ambulatory care. According to Dr. Allan Brookstonevii an EMR expert, "If most physicians in a health region or geographic area implemented an EMR system, the incentive for a local hospital or region to connect to those physicians would be significantly enhanced". In an emergency situation right now in Canada it is easier to access critical financial information than critical health information. This reality is not a matter of technology but the lack of will to put it in place. 2. Why the federal government should be interested in e-health interconnectivity. -Health information technology connectivity yields returns on investment: 8:1 International strategy and technology consulting firm Booz Allen Hamilton found that viii the benefits of an interconnected Electronic Health Record (EHR) in Canada could provide annual system-wide savings of $6.1 billion. These savings would come from reduced duplicate testing, transcription savings, fewer chart pulls and filing time, reductions in office supplies and reduced expenditures due to fewer adverse drug reactions. The study went on to state that the benefits to health care outcomes would equal or surpass these annual savings, thus providing a possible combined annual savings of $12.2 billion. In addition, a comprehensive literature reviewix comparing health IT productivity gains to similar industries in the U.S. concludes that effective EMR implementation and networking could eventually save more than $81 billion annually by improving health care efficiency and safety. Similarly, health information technology-enabled prevention and management of chronic disease could eventually double those savings while increasing health and other social benefits. Assuming that the Canadian health system is one-tenth the size of US system, savings would range from $8 to $16 billion annually. Connected health information technology - increasing performance and accountability A fundamental question the Standing Committee on Finance may ask is where $22 billion (growing at 6 % annually) in federal health care transfers to the provinces is going and what are the results of this support? Right now, we do not know exactly. Health care in Canada represents 10% of our economy ($160 billion annually and growing at 6% per year) and is larger than the total agricultural sector. The question Canadians are asking is not whether tax dollars should be spent on health care, but whether the money being spent is worth the services receivedx. Moreover, in health care, there are legitimate questions as to whether improvements to date have justified the associated costs. The public institutions and organizations that deliver health care in Canada could deliver more value than they do at present. With a national health information (management) system in place they could work to reduce variations in the quality of service and in the way services are used across the system. However at a national level, we do not have an accounting systemxi in place to uniformly measure quality across the country. 3. Who: Canadians - our patients - want and need e-health interconnectivity. Health information technology is critical to managing wait times Quality of care is an important concern for Canadians, but first they must be able to get the care they need. But waiting for health care is the principal concern for Canadiansxii. Excessive wait times result in mental anguish for patients and their families and also cost the Canadian economy billions of dollars each year. In 2007 a study commissioned by the CMAxiii conservatively calculated that excessive wait times in just four procedures (joint replacements, cataract surgery, coronary artery bypass grafts and MRIs) cost the economy over $14 billion in lost output and government revenues. It is important to note that beyond these hospital procedures there is potential to reduce wait times and cost in physician offices through information technology. This is why we have suggested accelerating the capital cost allowance tax for EMR related software and hardware purchases and that they go to community care and physician offices where most patient visits occur every day. Figure 1 below shows that in Ontario for example, just 3,000 out of an average of 247,000 patient visits per day or 1.2% of the total are made in hospitals. That is why this submission is aimed at (the circle area in the chart) increasing connectivity and tying investments to the 99% of the places where patients visit most. Figure 1 Patient visits per day in Ontario, Source: Canada Health Infoway Most of the emphasis on connectivity in Canadian health care to date has not focused on the point of care -even though the number of patient interactions with hospitals is greatly exceeded by the number of visits to physicians' officesxiv. Thus patient-physician office interactions outnumber patient-hospital interactions by a ratio of 18 to 1. It is also important that patients understand the value of electronic health records, which is why we are recommending a $10 million cross-country educational campaign to impact the demand side of this critical health and industrial equation. 4. Why physicians are involved in e-health interconnectivity The physician community can play a pivotal role in helping the federal governments make a connected health care system a realizable goal in the years to come. Through a multi-stakeholder process encompassing the entire health care team, the CMA will work toward achieving cooperation and buy-in. This will require a true partnership between provincial medical associations, provincial and territorial governments and Canada Health Infoway (CHI). Accelerating Advantage Canada through health information technologies The CMA's pre-budget submission, related to health system connectivity, incorporates the five tenets of Advantage Canadaxv. This submission principally addresses the infrastructure and knowledge advantages that are involved in investing in an interconnected network that is useless unless the 'knowledge' advantage to provide stewardship of the Electronic Health Record through our physicians' is in place. That is why we recommend that the federal government help support research, development and knowledge transfer at our major universities in health information technology by supporting 10 Canada Research Chairs in the faculties of Medicine, Management and Engineering. In addition, a pan-Canadian health information technology network will provide the kind of infrastructure that supports labour mobility where for example a migrant worker from Atlantic Canada can access his health records in Fort McMurray Alberta. 5. How to speed-up health information technology connectivity -a green tax incentive approach Thus far the strategy applied to health information connectivity in Canada has been focused on a top-down approach that has produced limited success. That is why the CMA is suggesting that the federal government accelerate the Capital Cost Allowance (CCA) on EMR-related software and hardware equipment over the next three years - an early-bird special or incentive. The CMA does not pretend to be tax policy experts however we do appreciate the federal governments' recent increase in the CCA rates for software and hardware. Our recommendation would mean changing the current software CCA (Class 12xvi) from 100% over two years to 100% in the first year specifically for EMR related investments. And for EMR hardware (Class 50xvii) accelerate the CCA to 100% in the first year from the current 55% rate for a limited time only of three years. These accelerated CCA rate proposals are also consistent with the governments' environmentally friendly CCA initiative as EMRs would save tonnes of paper for years. Mixed results for Canada Health Infoway => Health Information System Transition Fund The CMA lauds the federal government's 2008 Budget for making a $400-million investment in Canada Health Infoway (CHI) to support early movement toward patient wait time guarantees through the development of health information systems and electronic health records. At the same time the physician community believes that CHI has had mixed results, especially when it comes to digitizing and integrating patient records at the places where most patients contact the health care system: physician offices, laboratories and emergency rooms. However, we believe with targeted, conditional policies CHI can be an effective vehicle to accelerate the transition of current health centre paper practices into electronic operations through a time limited five-years Health Information Transition Fund. We also believe that federal transition funds should be matched at a fifty-fifty rate by the provinces. Although this may not be easy, there are other non-monetary policy levers (e.g. regulatory) that the federal government could and should use to persuade the provinces of the value of investing in electronic health record system integration. This is particularly true since the provinces will yield most of the return on the investment. It is imperative that the current health information technology gap be closed and be set at levels for similar service-intensive industries (see Figure 2 in the Appendix 1). That is why; beyond the figures outlined in this submission, the CMA recommends continued federal health information technology support for the next 10 years. Conclusion - Big investments. but big payoffs too As the Health Council of Canada stated in their 2008 annual reportxviii, "Change is underway, but too slowly". The OECD, WHO, The Commonwealth Fund and the Conference Board of Canada's research all strongly suggest that Canada lags behind the rest of the industrialized world in terms of health information technology investments and system integration. The investments made so far may seem large but they will be wasted if a second effort in connecting the entire system is not made now. It is time that the federal government finishes the job of health information system connectivity at the point of care. A Pan-Canadian network of health information will improve patient outcomes, health system efficiency and dramatically increase system accountability. The Health Council of Canada also said that, "These [health information technology] are big investments but the payoff is big too". Accordingly we suggest that over the next five years the following investments will improve the running of Medicare as well as the Canadian economy. The CMA recommends that the federal government should invest $570 million over five years in an interconnected pan-Canadian health information system that includes: => A $225 million, 5-year Health Information System Transition Fund aimed at change management training and support involved in converting 26 million patient records in 36,000 physician offices and community care facilities into interoperable electronic records across Canada. => $305 million for a 3-year time limited accelerated Capital Cost Allowance for EMR software and hardware costs related to health information technologies that connect patient records from physician offices to laboratories and hospitals. => $10 million to sponsor a cross-country education campaign to inform Canadians of the health and system benefits of e-health connectivityxix. => $2 million annually for Canada Research Chairs promoting the value of interconnectivity in health information between the faculties of Medicine, Management and Engineering. References 1The cumulative economic cost of waiting for treatment across just 4 priority areas in 2007 was an estimated $14.8 billion. This reduction in economic activity lowered federal and provincial government revenues in 2007 by a combined $4.4 billion. See:www.cma.ca/multimedia/CMA/Content_Images/Inside_cma/Media_Release/pdf/2008/EconomicReport.pdf 2 Almost 5-million Canadians do not have a family physician. Canada would need 26,000 more doctors to meet the OECD average of physicians per population. Physicians spend more time on paperwork and less with patients than they did 20 years ago. See: "More Doctors. More Care.": www.moredoctors.ca/take_action/ 3 Please see Table l in Appendix 1 for full investment horizon details. i Patient perspective on electronic medical record. Meldgaard M; International Society of Technology Assessment in Health Care. Meeting (19th : 2003 : Canmore, Alta.). Annu Meet Int Soc Technol Assess Health Care Int Soc Technol Assess Health Care Meet. 2003; 19: abstract no. 148. CONCLUSIONS: Patient confidence and perceived quality of care is influenced by a well informed forward-looking staff as can be obtained in settings where EPR is successfully implemented. Patient satisfaction and the functional level of EPR implementation are interdependent. ii A Report Card on Canada see: http://sso.conferenceboard.ca/HCP/overview/health-overview.aspx iii Organization for Economic Co-operation and Development [OECD] (2007). OECD Health Data 2007. Version 07/18/2007. CD-ROM. Paris: OECD. iv World Health Organization [WHO] (2007). World Health Statistics 2007. see: http://www.who. v Mirror, Mirror on the Wall: An International Update on the Comparative Performance of American Health Care May 15, 2007 (updated May 16, 2007)
Volume 59 Authors: Karen Davis, Ph.D., Cathy Schoen, M.S., Stephen C. Schoenbaum, M.D., M.P.H., Michelle M. Doty, Ph.D., M.P.H., Alyssa L. Holmgren, M.P.A., Jennifer L. Kriss, and Katherine K. Shea Editor(s):Deborah Lorber see: www.commonwealthfund.org/publications/publications_show.htm?doc_id=482678 vi See Tables Q39 and Q40a in the 2007 National Physician Survey at:www.nationalphysiciansurvey.ca/nps/ vii Dr. Alan Brookstone is a family physician in Richmond, BC and the founder of CanadianEMR. The quote was taken from: Online resource enables MDs to rate EMRs. See: www.cma.ca/multimedia/CMA/Content_Images/Inside_cma/Future_Practice/English/2007/November/Online-e.pdf The CanadianEMR Physician Resource Directory provides access to a province specific searchable list of vendors of products and services to support the EMR-based practice. http://www.canadianemr.ca/ viii Booz, Allan, Hamilton Study, Pan-Canadian Electronic Health Record, Canada's Health Infoway's 10-Year Investment Strategy, March 2005-09-06. ix Can Electronic Medical Record Systems Transform Health Care? Potential Health Benefits, Savings, And Costs Richard Hillestad, James Bigelow, Anthony Bower, Federico Girosi, Robin Meili, Richard Scoville and Roger Taylor, Health Affairs, 24, no. 5 (2005): 1103-1117. x In November 2008 the Auditor General of Canada will present it's performance audit on, "Reporting on Health Indicators-Health Canada" to Parliament. See: www.oag-bvg.gc.ca/internet/English/oag-bvg_e_29401.html xi There has been heavy emphasis is being placed on "accountability" and "performance measurement," endorsed by the Romanow Commission (Commission on the Future of Healthcare in Canada 2002), the Kirby Committee (Standing Senate Committee on Social Affairs, Science and Technology 2002), and the First Ministers' accord (First Ministers 2004). See Raisa Deber Why Did the World Health Organization Rate Canada's Health System as 30th? Some Thoughts on League Tables. Some Thoughts on League Tables xii The results of an Ipsos Reid poll (January 2008) finds that eight in ten (78%) Canadians believe that hospital and other health care wait times cost Canada money because people who are waiting for treatment are less productive and miss work. This is compared to just two in ten (19%) who think that wait times save Canada money because governments don't have to put as many resources into healthcare. xiii The economic cost of wait times in Canada, January 2008. This study was commissioned by the Canadian Medical Association (CMA) to analyze the economic costs of wait times in Canada's medical system. The CMA's membership includes more than 67,000 physicians, medical residents and medical students. It plays a key role by representing the interests of these members and their patients on the national stage. Located in Ottawa, the CMA has roots across the country through its close ties to its 12 provincial and territorial divisions. See: www.cma.ca/multimedia/CMA/Content_Images/Inside_cma/Media_Release/pdf/2008/EconomicReport.pdf xiv Sources: Physician visits - CIHI - Physicians in Canada: Fee-for-Service Utilization 2005-2006. Table 1-21. Hospital contacts - CIHI - Trends in Acute Inpatient Hospitalizations and Day surgery Visits in Canada 1995-1996 to 2005-2006 and CIHI -National Ambulatory Care Reporting System - Visit Disposition by Triage Level for All Emergency Visits - 2005-2006. xvAdvantage Canada builds on Canada's strengths and seeks to gain a global competitive advantage in five areas: 1. Tax Advantage-Reducing taxes for all Canadians and establishing the lowest tax rate on new business investment in the G7. 2. Fiscal Advantage-Eliminating Canada's total government net debt in less than a generation. 3. Entrepreneurial Advantage-Reducing unnecessary regulation and red tape and increasing competition in the Canadian marketplace. 4. Knowledge Advantage-Creating the best-educated, most-skilled and most flexible workforce in the world. 5. Infrastructure Advantage-Building the modern infrastructure we need. xvi Software: CLASS 12 , (100 per cent) Property not included in any other class that is.... (o) computer software acquired after May 25, 1976, but not including systems software or property acquired after August 8, 1989 and before 1993 that is described in paragraph (s). xvii Hardware: CLASS 45 , (45 per cent) Property acquired after March 22, 2004 (other than property acquired before 2005 in respect of which an election is made under subsection 1101(5q)) that is general-purpose electronic data processing equipment and systems software for that equipment, including ancillary data processing equipment. Draft Regulation (a) electronic process control or monitor equipment; (b) electronic communications control equipment; (c) systems software for equipment referred to in paragraph (a) or (b); or (d) data handling equipment (other than data handling equipment that is ancillary to general-purpose electronic data processing equipment). Class 50 (55 per cent) Property acquired after March 18, 2007 that is general-purpose electronic data processing equipment and systems software for that equipment, including ancillary data processing equipment, but not including property that is principally or is used principally as (a) electronic process control or monitor equipment; (b) electronic communications control equipment; (c) systems software for equipment referred to in paragraph (a) or (b); or (d) data handling equipment (other than data handling equipment that is ancillary to general-purpose electronic data processing equipment). xviii Health Council of Canada, Rekindling Reform: Health Care Renewal in Canada, 2003 - 2008, June 2008 (page 23). See: www.healthcouncilcanada.ca/docs/rpts/2008/HCC%205YRPLAN%20(WEB)_FA.pdf Appendix 1 (Table does not display correctly -- See PDF) Table 1 -Health Interconnectivity investments over five years. Figure 2 -Major Canadian health centers are well below industry IT investment standard
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Towards a Sustainable Health Care System in the New Millennium : Submission to the House of Commons Standing Committee on Finance 2000 Pre-Budget Consultation Process

https://policybase.cma.ca/en/permalink/policy1977
Last Reviewed
2018-03-03
Date
1999-09-10
Topics
Population health/ health equity/ public health
Health systems, system funding and performance
  2 documents  
Policy Type
Parliamentary submission
Last Reviewed
2018-03-03
Date
1999-09-10
Topics
Population health/ health equity/ public health
Health systems, system funding and performance
Text
On the cusp of the new millennium, it is appropriate to reflect with pride on our nation's past and to plan with compassion, innovation and creativity for our nation's future. The new century will present us with many challenges-an ageing population, increased knowledge with corresponding advances in technology and research, competitiveness at home and abroad- to meet the needs of Canadians. CMA recognizes that we live in a world that is increasingly interdependent. A world where globalization has meant that we, as a country, must look forward and beyond our borders when it comes to determining how we can reach our collective potential. [BOX CONTENT DOES NOT DISPLAY PROPERLY. SEE PDF FOR PROPER DISPLAY] [BOX END] As we plan for the future it is vital to recognize the importance of the social programs that must remain essential features of our society. Our health care system is an important and defining feature of what it is to be Canadian. CMA believes a well funded, sustainable, quality health care system must be at the forefront of the federal government's strategic priorities. The haste to reduce health care costs over the past several years has left a destabilized and demoralized health system in its wake. Diminished access to critical health care services and insufficient human resources are only part of the legacy. Rebuilding Canadians' confidence in the health care system will not be easy. CMA noted the important first step that was taken by the federal government in its 1999 budget. A reinvestment of $11.5 billion earmarked for health care was an important signal to Canadians. However, with the complete restoration of funds in 2003/04 the health care system will only be back to its 1995 nominal spending levels, some seven years after the fact - with no adjustment for the increasing health care needs of an increased number of more aged Canadians, inflation or economic growth. CMA is encouraged with federal government's recent initiatives to increase health research funding. This is of direct benefit to the health of Canadians; to the health care system; to foster the development of health care as an industry and to ensure our best and brightest medical scientists and health researchers are educated and remain in Canada. However, we know that more needs to be done to ensure innovation and competitiveness. We would like to echo the words of the Prime Minister who said we consider Medicare to be the best example of how good social policy can be good economic policy, too. While reflecting the desire of Canadians to show compassion for their fellow citizens, Medicare also serves as one of our key competitive advantages. A sustained health care system will ensure a healthy population, and a healthy labour force that contributes to the productivity of the nation. In seeking to place the health care system on the road to long-term sustainability, the CMA is committed to working in close partnerships with the federal government and others in identifying, developing and implementing policy initiatives that serve to strengthen Canadians' access to quality health care The CMA looks forward to contributing to the search for solutions. To work with the federal government and others in building a responsive, flexible and sustainable health care system for all Canadians. In this spirit of co-operation the CMA offers the following recommendations: 1. That the federal government fund Canada's publicly financed health care system on a long-term, sustainable basis to ensure quality health care for all Canadians. 2. That the federal government introduce a health-specific portion of federal cash transfers to the provinces and territories to promote greater public accountability, transparency and visibility. 3. That the federal government, at a minimum, increase federal cash for health care by an additional $1.5 billion, effective April 1, 2000. 4. That beginning, April 1, 2001, the federal government fully index the total cash entitlement allocated to health care through the use of a combination of factors that would take into account the changing needs of Canadians based on population growth, ageing, epidemiology, current knowledge and new technologies, and economic growth. 5. That the federal, provincial and territorial governments adopt the guiding principle of national self-sufficiency in the production and retention of physicians to meet the medical needs of the population, including primary to highly specialized medical care, and the requirements for a critical mass for teaching and research. 6. That the federal government establish and fund a national pool of re-entry positions in postgraduate medical education. 7. That the federal government establish a National Centre for Health Workforce Research. 8. That the federal government enhance financial support systems, such as the Canada Student Loans Program, for medical students in advance of any future tuition increase, and ensure that these support systems are set at levels that meet the financial needs of students. 9. That health care services funded by the provinces and territories be zero-rated. 10. That the federal government establish a National Health Technology Fund to increase country-wide access to needed health technologies. 11. That the federal government continue to increase funding for health research on a long-term, sustainable basis. 12. That the federal government commit stable funding for a comprehensive tobacco control strategy; this strategy should ensure that the funds are invested in evidence-based tobacco control projects and programs, which would include programs aimed at prevention and cessation of tobacco use and protection of the public from tobacco's harmful effects. 13. That the federal government support the use of tobacco tax revenues for the purpose of developing and implementing tobacco control programs. 14. That the federal government place a high priority for funding tobacco prevention and evidence-based cessation programs for young Canadians as early as primary school age. 15. That the federal government follow a comprehensive integrated tobacco tax policy a) To implement selective stepwise tobacco tax increases to achieve the following objectives: (1) reduce tobacco consumption, (2) minimize interprovincial/territorial smuggling of tobacco products, and (3) minimize international smuggling of tobacco products; b) To apply the export tax on tobacco products and remove the exemption available on tobacco shipments in accordance with each manufacturers historic levels; and c) To enter into discussions with the US federal government to explore options regarding tobacco tax policy, raising Canadian tobacco price levels in line with or near the US border states, in order to minimize international smuggling. 16. That the dollar limit of RRSPs at $13,500, increase to $15,500 for the year 2000/01. 17. That the federal government explore mechanisms to increase RRSP contribution limits in the future given the delay in achieving pension parity, since 1988. 18. That the 20% Foreign Property Rule for deferred income plans such as Registered Retirement Savings Plans and Registered Retirement Income Funds be increased in 2% annual increments to 30% over a five year period, effective the year 2000. 19. That the federal government explores the regulatory changes necessary to allow easier access to RRSP funds for investment in small and medium-size businesses. 20. That the federal government undertake the necessary steps to creditor-proof RRSPs and RRIFs. I. INTRODUCTION The Canadian Medical Association (CMA) commends the federal government in its second mandate, for continuing with the pre-budget consultation process. This visible and accountable process encourages public dialogue in the consideration and development of finance, economic and social policies of the country. [BOX CONTENT DOES NOT DISPLAY PROPERLY. SEE PDF FOR PROPER DISPLAY] [BOX END] As part of the 2000 pre-budget consultation process, the CMA welcomes the opportunity to submit its views to the House of Commons Standing Committee on Finance, and looks forward to meeting with the Committee at a later date to discuss our recommendations and their rationale in greater detail. II. POLICY CONTEXT Over the past few years, there has been a significant amount of attention placed on the fact that Canada is living in a world that is increasingly interdependent. A world where globalization has meant that we, as a country, must look forward, outward and with others when it comes to determining how we can reach our collective potential. While further political and economic change is likely to continue, it is important to recognize that there are important social programs that must remain essential features of our society. One such program is our health care system - an important and defining feature of what it is to be Canadian. The CMA believes that when it comes to maintaining and enhancing the health of Canadians, a well-funded, sustainable health care system must be at the forefront of the federal government's strategic priorities. By 2002, it is estimated that there will be 2.3 million more Canadians and 444,000 more Canadians over the age of 65. As a consequence, Canada's health care system will continue to face significant challenges in the near future. The pan-Canadian haste of governments across the country to reduce health care costs as quickly as possible over the past several years left a destabilized and demoralized health system in its wake. Diminished access to critical health care services and insufficient human resources are only part of the legacy. The initial federal reinvestment will help ease some of the pressures but it will not be much more than a short-term solution given that expectations and demands on the system will continue to rise. Rebuilding Canadians' confidence in the health care system will not be easy. Reports of overcrowded emergency rooms, physician and nursing shortages, and of patients being sent to the United States for treatment to reduce waiting times will not help restore their faith. The CMA fully recognises the importance of the first step taken by the federal government. However, fundamental questions remain about future steps needed to sustain our cherished health care system over the short-, medium- and long-term - ensuring that all Canadians will have ready access when they or their families are in need. Given this first step, the CMA believes that we must shift our focus to the vision and overarching strategic framework the federal government must develop to ensure that the health care system will be funded on a sustainable basis. In seeking to place the health care system on the road to long-term sustainability, the CMA is committed to working closely with the federal government in identifying, developing and implementing policy initiatives that serve to strengthen Canadians' access to quality health care. III. TOWARDS A SUSTAINABLE HEALTH CARE SYSTEM In its 1999 budget, the federal government took an important first step forward toward stabilizing Canada's health care system. The government announced a five-year fiscal framework, effective April 1, 1999 that reinvested $11.5 billion, on a cumulative basis, in the health care system. While this is an important first step, it must be placed in perspective. The $11.5 billion is a cumulative figure over five consecutive years. On an annual basis, this means that federal cash for health care is scheduled to increase by $2.0 billion for 1999/2000; it will remain at the same level for 2000/01 and then increase by $500 million (to $2.5 billion) in 2001/02, and remain at that level for the years 2002/03 and 2003/04. Only in year 4 does the CHST cash floor increase by a total of $2.5 billion. 1 Restoring $2.5 billion to the Canada Health and Social Transfer (CHST) cash floor in 2002/03, the fourth year of the government's five-year timetable, means that the health system will only be back to its 1995 nominal spending levels, 7 years after the fact - with no adjustment for the increasing health care needs of Canadians, inflation or economic growth. 2 [TABLE CONTENT DOES NOT DISPLAY PROPERLY. SEE PDF FOR PROPER DISPLAY] [TABLE END] In current dollars, it is estimated that the federal government allocates approximately 41% of CHST cash for health care. Based on a cash floor of $12.5 billion this amounts to $5.13 billion. The CMA recognizes that the federal amount has increased cash by a minimum of $2.0 billion in 1999/00 to $7.13 billion, however, once again this figure must be placed in context; $7.13 billion represents only 9 cents of each dollar spent on health care in Canada. Another way to express the $11.5 billion is to adjust the figure by the number of Canadians (i.e., a per capita basis - see Figure 1). 3 Scenario 1 illustrates nominal per capita federal CHST cash for health care prior to the 1999 budget with projections to 2003/04. In absence of a five-year fiscal framework introduced by the government, federal CHST cash (formerly Established Programs Financing and the Canada Assistance Plan) would have gone from $247 in 1990/01 to $163 per Canadian in 2003/04 - a decrease of 34%. Adjusting for inflation, federal CHST cash for health care would have dropped from $247 to $131 per Canadian - a decrease of 47%. With the introduction of the $11.5 billion in 1999 (Scenario 2), nominal per capita CHST cash for health care increases from $168 to $233 in 1999/00. This, however, falls short of the $258 per capita in 1995/96. With an estimated population of 30.6 million Canadians, the CHST shortfall is estimated to be $765 million (i.e., $258 - $233 x 30.6 million). Recognizing that inflation since 1995 has eroded the value of the federal CHST cash in 1999, the figure is estimated to be closer to $1.5 billion than $1.0 billion. Furthermore, there is no escalator attached to the federal CHST cash to account for inflation, a growing and ageing population, epidemiological trends or the diffusion of new technologies. This is a departure from previous formulae under Established Programs Financing (EPF) and the CHST which included an escalator (i.e., a three-year moving average of nominal Gross Domestic Product) to grow the value of the cash transfer. 4 In summary, the context placed around $11.5 billion is important, for it underscores the importance of the initial step that has been taken by the federal government when it comes to shoring up funding for health care in Canada. However, the critical issue now becomes what immediate and successive steps will be taken by the government to place the funding of our health care system on a longer-term and sustainable basis. The CMA is not alone in its view that there must be a full restoration of CHST cash. The Communiqué issued by the First Ministers at the recent 40th Annual Premiers Conference in Quebec City was clear in the interpretation of sustainability. While we consider how to ensure that the health care system will be here for all Canadians over the short, medium and long-term, we know that our society is growing and ageing. It is projected that individuals over the age of 65 will increase from just over one in ten (12.2%) in 1996 to one in five (21.7%) in 2031. 5 [BOX CONTENT DOES NOT DISPLAY PROPERLY. SEE PDF FOR PROPER DISPLAY] [BOX END] The combination of population growth and ageing will place additional pressure on health expenditures. Estimated per capita health expenditures by age for 1994 (see Table 1), shows that per capita expenditures for the 65 and over age group were $8,068, in comparison to $2,478 for the population as a whole-just over a three-to-one ratio. 6 Of interest, while the 65 and over population represented less than 12% of the population in 1994, it is estimated to have accounted for almost 40% of total health expenditures. The Auditor General of Canada, using age-specific per capita health spending, has projected that government health expenditures may reach 12% of GDP. 7 This is a large estimated increase given that the 1998 total health expenditures, which includes both government and private sources, is approximately 9% of GDP. [TABLE CONTENT DOES NOT DISPLAY PROPERLY. SEE PDF FOR PROPER DISPLAY] Table 1 Per Capita Health Expenditures By Age Group, 1994 Age Group Expenditures per capita 0-14 $1,156 15-44 $1,663 45-64 $2,432 65+ $8,068 Source: National Health Expenditures, CIHI, 1996. [TABLE END] While it may be argued that those are only estimates, the OECD study on population shows that they are not at all atypical of the international experience. 8 This information alone will present the health care system with a number of challenges when it comes to meeting the future needs of the population. Given the current and impending pressures on the health care system, it is incumbent on the federal government - the guardian of Medicare - to think how we, as a society, will be able to maintain our health care system well beyond the new millennium. [BOX CONTENT DOES NOT DISPLAY PROPERLY. SEE PDF FOR PROPER DISPLAY] [BOX END] The CMA therefore recommends: 1. That the federal government fund Canada's publicly financed health care system on a long-term, sustainable basis to ensure quality health care for all Canadians. 2. That the federal government introduce a health-specific portion of federal cash transfers to the provinces and territories to promote greater public accountability, transparency and visibility. 3. That the federal government, at a minimum, increase federal cash for health care by an additional $1.5 billion, effective April 1, 2000. 4. That beginning April 1, 2001, the federal government fully index the total cash entitlement allocated to health care through the use of a combination of factors that would take into account the changing needs of Canadians based on population growth, ageing, epidemiology, current knowledge and new technologies, and economic growth. Recommendation 1 is principle-based and speaks to the importance of moving away from managing Canada's health care system on a crisis-to-crisis basis. While the balance between affordability and sustainability of our system should be at the forefront of our thinking, it must not deny Canadians reasonable access to quality health care. It also recognizes that although the federal government has an essential role to play, it cannot do it alone; it must work in close partnership with the provinces and territories. Consistent with the Minister of Health's call for increased accountability and transparency in our health care system, Recommendation 2 calls on the federal government to be measured by the very same principle when it comes to funding Canada's health care system. It is also consistent with the Social Union Agreement calling for greater public accountability on all levels of government. While last year's allocation under the CHST for health care sends an important message, consideration must be given as to how the CHST can be restructured to promote greater transparency and linkage between the sources of federal funding for health care and their intended uses at the provincial/territorial level. This is particularly important when one considers the need to better understand the relationship between defined health care expenditures and their relationship to health outcomes. In fact, it could be argued that last year's federal budget implicitly re-introduced the concept of earmarking CHST cash to health care. At a time of increased demand for accountability, the CHST mechanism appears to be anachronistic by having one indivisible cash transfer that does not recognize explicitly the federal government's contribution to health in a post-Social Union Agreement world. Last year, the CMA recommended to the federal government that it reinvest a total of $3.5 billion effective April 1, 1999 into the health care system with the principal objectives of: stabilizing the health care system; and assisting in the transitional process of expanding the continuum of care. As part of the $3.5 billion, the CMA recommended the creation of a Health System Renewal Fund which focused on four discrete areas of need: (1) acute care infrastructure; (2) community care infrastructure; (3) support Canadians at risk; and (4) health information technology. Given that the government reinvested $2.0 billion in 1999/2000, the CMA recommends that the federal government move immediately to reinvest an additional $1.5 billion for health care to facilitate continued system stabilization as well as further development toward an expanded continuum of care. These additional and necessary resources would be welcomed in addressing strategic policy challenges related to health human resource requirements - particularly those associated with the need for an adequate and stable supply of physicians and nurses; the cornerstone of our health care system. Furthermore, these resources would assist in the development of necessary capital infrastructure required to assist in the transition from institutional to community-based models of care, within a more integrated framework. While more specific and substantial funding announcements would be expected with any new shared programs announced by the federal and provincial/territorial governments (e.g., home care and pharmacare), there is a need now, while the system is in flux to ensure that no one falls through the cracks. This transitional funding will assist in the stabilization of the system and will also serve to ensure that as the system evolves toward an expanding continuum of care, it will remain accessible, with minimal interruption of service to Canadians. Based on recent estimates of the government's surplus in 1999 (standing at $4.8 billion through the first three months of fiscal 1999) and beyond, (9) it would appear that the government has an opportunity to make good on its commitment to make health care a key priority for future action. [BOX CONTENT DOES NOT DISPLAY PROPERLY. SEE PDF FOR PROPER DISPLAY] [BOX END] Recommendation 4 addresses the need for a fully indexed escalator to ensure that the federal cash contribution will continue to grow to meet the future health needs of Canadians. The escalator formula recognizes that health care needs are not always synchronized with economic growth. In fact, in times of economic hardship (e.g., unemployment, stress, and familial discord), a greater burden is placed on the health care system. If left as is, the current federal cash value will continue to erode over time with increasing demands from an ageing and growing population, and inflation. Combined, these recommendations speak not only to the fundamental principles of the necessity of having a sustainable health care system, but also in terms of the federal government continuing to take the necessary concrete leadership steps to ensure that adequate and long-term funding is available to meet the health care needs of all Canadians. The recommendations are strategic and targeted, and serve to build on and strengthen the core foundation of our health care system. If Canada's health care system is not only to survive, but thrive in the new millennium, we must give serious consideration to a range of possible solutions that place our system, and the federal role in that system, on a more secure and sustainable financial foundation. The CMA is prepared to continue to work with governments and others in developing innovative and lasting solutions to the challenges that face the health care system. IV. SUSTAINABLE HEALTH CARE AND PRODUCTIVITY In last year's report tabled in the House of Commons, the Standing Committee on Finance proposed the development of a productivity covenant. The Covenant "should subject all existing government initiatives (spending, taxation, regulation) to an assessment which evaluates their expected effects on productivity and hence the standard of living of Canadians. Every new budgetary initiative should be judged according to this productivity benchmark." 10 [BOX CONTENT DOES NOT DISPLAY PROPERLY. SEE PDF FOR PROPER DISPLAY] [BOX END] In the context of reinvesting in health care, the Standing Committee's Covenant asks that a "business case" be made. The CMA is of the view that there exists an important relationship between a well-funded, sustainable, public health care system and economic productivity. Just as strong economic fundamentals are generally viewed as an essential requirement for Canada's prosperous future, stable, adequate and where required, increased resources for health and health care funding should also be considered as an investment in the future well-being of Canadians, and by extension, our economic ability to compete. Framed in this context, these "investments" strengthen the capacity of Canadians to live rewarding and productive lives. From a structural perspective, studies have recognized the link between a well-funded, sustainable health care system as an important contributor to Canada's economic performance. 11 [BOX CONTENT DOES NOT DISPLAY PROPERLY. SEE PDF FOR PROPER DISPLAY] [BOX END] The studies suggest that the nature in which Canada largely finances its health care system through general taxes is more efficient compared to the United States which finances its system predominantly through employer-sponsored programs. Compared to the United States, Canada finances its health care system more equitably by spreading the financial risk across all taxpayers. As well, issues related to job mobility and the portability of health care benefits are not in question in the Canadian system. However, recent federal underfunding in health care has significantly contributed to impaired access to care by injured and sick workers delaying their return to work, decreasing productivity and increasing the cost of doing business and the cost to society. 12 A well-funded, sustainable health care system can be viewed as an important component in the decision-making process of businesses to locate in Canada. 13 In this context, there are a number of benefits that may accrue to Canadians at the individual and societal level, for example: * it can attract medium- and long-term business investment; * lead to the development of new infrastructure (e.g., facilities, equipment); * nurture the development of new long-term (value-added) jobs; * generate real and growing incomes; * increase individual and societal economic activity/consumption, wealth and investment capital; * reduce overall dependence on publicly funded social programs (e.g., employment insurance, income support programs); and * contribute to a growing and sustainable tax base. Underscoring the important linkages between the quality of life of Canadians and productivity is the important role of an efficient and well-funded public health care system and sustained economic growth. Given that policy decisions impact on the economy, health and health care should not necessarily be considered in isolation. In fact, wherever possible, good economic policy and good health and health care policy should be mutually reinforcing, or at a minimum, better synchronized. In an increasingly global, interdependent and competitive marketplace, businesses are not looking to assume greater costs. When it comes to health care, they are not looking to absorb high risk and high cost cases that are currently funded through the public sector. Instead, it would appear that they prefer a well-funded, sustainable health care system that is responsive to the health and health care needs of Canadians. 14 As well, a sustainable publicly funded health care system affords Canadians full mobility (i.e., portability) when it comes to pursuing job opportunities, which in turn, improves productivity. Good economic policy and good health care policy are compatible Canadian societal priorities. One need not be sacrificed to achieve the other nor should they be considered to be in competition with each other. Access to quality health and health care services is an important contributor towards Canada's ability to remain competitive in an increasingly complex global economic environment. Governments at all levels, must take responsibility to ensure that the health system remains on a long-term sustainable financial footing to the extent that it continues to benefit Canadians at the individual and societal level, and in terms of maximizing our quality of life and our ability to be productive. V. PHYSICIAN WORKFORCE ISSUES Canada is now beginning to experience a physician shortage that will be significantly exacerbated in the early decades of the next century. One of the chief contributing factors to the emerging shortage of physicians has been the almost singular focus of governments in their efforts to contain health care costs in the 1990s. A key policy approach introduced by governments to reduce cost growth in health has been to decrease the supply of physicians. A 12-point accord on physician resource management reached by Health Ministers in Banff, Alberta in 1992 included a recommendation for a 10% reduction in undergraduate enrolment in medical schools, which was implemented in the fall of 1993, and a recommendation for a similar percentage reduction in the number of postgraduate training positions. In addition, the introduction in 1992 of the requirement for a minimum of 2 years of prelicensure training removed most of the flexibility that used to exist in the number of postgraduate training slots. For instance, the opportunity for re-entry was no longer available to practising physicians; these re-entry opportunities ensured that young graduates (in general and family medicine) who had opted to go out and do locums or rural placements could then come back into the system at a later date for skills enhancement or speciality training. What the federal/provincial/territorial Ministers of Health did not take into account, however was that the output of Canada's medical schools peaked in the mid-1980s. Between 1986 and 1989, physician supply increased on average by 1,900 per year. This growth was halved between 1989 and 1993 - dropping to an average increase of 960 physicians per year. After 1993, total physician supply dropped in three successive years. This period of declining growth occurred well before the 1993 reductions have had an opportunity to work through the undergraduate education and post-MD training systems. Part of the reason for the decrease in supply is fewer Canadian medical graduates, but a significant part is due to increased attrition from the physician population. One factor has been increased retirement of physicians. The annual number of physicians retiring increased by 40% between the 1985-1989 and 1990-1995 periods. Although there have been up turns in the total supply of physicians in 1997 (285) and 1998 (960), this is unlikely to be sustained, given our lower levels of output from the educational system and higher attrition. The removal of most of these positions was unfortunate because re-entry can provide for more flexibility in the system and can allow for a more rapid adjustment in the physician workforce to meet the health needs of the public. For the Committee's information, appended to the Brief is the CMA's Draft Principles for a Re-entry System in Canadian Postgraduate Medical Education. According to the CMA's projection via the Physician Resource Evaluation Template (PRET), if the current levels of enrolment and attrition patterns continue, Canada will definitely experience a physician shortage in the first decades of the next century, especially after 2011, when the baby-boomer cohort of physicians will begin to retire. There is additional evidence that Canada is experiencing a physician shortage. First, it can be demonstrated that physicians are working harder than ever. Data from the CMA Physician Resource Questionnaire survey show that the mean hours per week worked by physicians (excluding on-call) have increased from 46.9 per week in 1993 to 54.1 hours in 1999 - an increase of 15.4%. [BOX CONTENT DOES NOT DISPLAY PROPERLY. SEE PDF FOR PROPER DISPLAY] [BOX END] Second, population-based data suggest that it is becoming more difficult to access physician services. Tracking surveys conducted by the Angus Reid group on behalf of CMA show that in 1998, an estimated 60% of the population believed that access to specialist services has worsened in the past couple of years - up from 41% in 1996. Similarly, in 1998 27% of Canadians reported that access to services from a family physician had worsened - almost double the level of 14% that was reported in 1996. 15 An August 1999 poll conducted by Angus Reid asked Canadians to assess the availability of physicians in their own communities. Only a little over one half of Canadians (52%) feel there are enough physicians available to meet their community's needs. Furthermore, they expect the situation to worsen over the next five years. Less than one third (29%) feel that five years from now there will be enough physicians to meet the health care needs in their communities. 16 In summary, there is ample evidence that not only is Canada heading for a severe physician shortage, but that a shortage has been developing over the past few years. At the same time, it must be recognized that it takes on average six years to train a general practitioner and 8-12 years to train a specialist from the time one enters medical school. If we are to avoid what appears to be a significantly worsening crisis, planning for the future must begin immediately. The CMA therefore recommends: 5. That the federal, provincial and territorial governments adopt the guiding principle of national self-sufficiency in the production and retention of physicians to meet the medical needs of the population, including primary to highly specialized medical care, and the requirements for a critical mass for teaching and research. 6. That the federal government establish and fund a national pool of re-entry positions in postgraduate medical education. In close consultation and collaboration with the provinces and territories, the federal government could play an increasingly vital role when it comes to ensuring that Canada produces an adequate supply of physicians. Furthermore, it could play a role in giving physicians the flexibility they need should they require additional training to meet the emerging needs of Canadians. Cost containment initiatives have also led to decreased numbers of other health care providers all across the country, particularly nurses. The federal government could play a major role in funding and coordinating research across all jurisdictions in Canada on the appropriate supply, mix and distribution of the entire health workforce. Strategic planning in the short, medium and long-term would be greatly facilitated through the establishment of a national institution that could draw on existing national databases and compile research from all the centres in the jurisdictions across the land. The CMA therefore recommends: 7. That the federal government establish a National Centre for Health Workforce Research. RURAL-REMOTE ISSUES While there are physician shortages across the country, it is particularly acute in rural and remote regions of Canada. For a number of personal and professional reasons, physicians are not finding rural and remote practice as rewarding nor sustainable. In 1999, CMA conducted a survey of rural physicians who were asked to rate their level of satisfaction with rural medical practice both from a personal and professional perspective; this study was funded by Health Canada. A similar survey was previously done in 1991. 17 There has been little change in the level of satisfaction for the personal and family factors. However, the level of satisfaction with the professional factors has fallen significantly. In 1991, the proportion indicating they were very satisfied with work hours, professional backup, availability of specialty services and continuing medical education opportunities all decreased by at least 10 percentage points. Similarly, the percentage who were very satisfied with hospital services fell by more than half from 40% in 1991 to 17% in 1999. Likewise, in 1991 42% were very satisfied with their earning potential compared with 23% in 1999. ESCALATION AND DEREGULATION OF TUITION FEES The CMA remains very concerned about high, and rapidly escalating, medical school tuition fee increases across Canada. The CMA is particularly concerned about their subsequent impact on the physician workforce and the Canadian health care system. In addition to the significant impact of high tuition fees on current and potential medical students, the CMA believes that high tuition fees will have a number of consequences, they will: (1) create barriers to application to medical school and threaten the socioeconomic diversity of future health care providers serving the public; and (2) exacerbate the physician 'brain drain' to the United States so that new physicians can pay down their large and growing debts more quickly. In support of this priority matter, the CMA Board has struck a working group to develop a position paper on tuition fee escalation and deregulation; the working group is also planning a national, multiprofession stakeholder conference on this issue. In addition to the recommendation that follows, the CMA believes that governments should increase funding to medical schools to alleviate the pressures driving tuition increases, and that any further tuition increases should be regulated and reasonable. The CMA decries tuition deregulation in Canadian medical schools and recommends: 8. That the federal government enhance financial support systems, such as the Canada Student Loans Program, for medical students in advance of any future tuition increase, and ensure that these support systems are set at levels that meet the financial needs of students. BRAIN DRAIN The net loss of physicians from Canada to other countries has doubled since the beginning of the 1990s. Whereas a net loss of 223 physicians due to migration was recorded in 1991, the corresponding figure for 1997 was 432 physicians - which represents roughly the annual output of four to five medical schools. While these physicians leave for a variety of professional and personal reasons, what is particularly telling is that the figure has doubled over the course of the 1990s. [BOX CONTENT DOES NOT DISPLAY PROPERLY. SEE PDF FOR PROPER DISPLAY] [BOX END] For several years, the CMA has warned governments and policy makers about the impending crisis of physician shortages and their implications for the health care system. Regrettably, the calls for a more measured, responsible and deliberate approach to physician resource planning has fallen on deaf ears. There are a number of factors that contribute to physicians leaving Canada. While they would appear to be a combination of personal, professional and economic considerations, the bottom line is our brain drain is a de facto brain gain for another country - predominantly the United States. In reviewing the brain drain issue, Statistics Canada concludes that "there is significant net brain drain in the health professions. Brain gain in health is not enough to make up for brain drain to the United States." 18 This issue is very real for physicians - who are being asked to do more where colleagues are no longer practising; and to the public - who are being asked to be patient as access to the system is delayed or compromised. In the absence of timely, strategic and lasting policy measures, we are likely to continue to risk losing physicians - many of them our best and brightest - to other countries. In this regard, the CMA is of the view that the federal government has an important role to play when it comes to synchronizing policy in the areas of health care, finance and economics. One factor that may contribute to a physician's decision to leave or think about leaving Canada is our tax structure. It is important to note that Canada relies more heavily on personal income taxes than any other G-7 country. 19 While this is important, what is more of concern is how Canada's marginal tax structure compares to that of the United States. While it is understood that Canada has taken a fundamentally different approach with regard to the magnitude and role of the tax system in social policy, the gap between the two systems can no longer be ignored in a world of increasing globalization, economic interdependence and labour mobility. While Canada's personal income tax schedule should be reviewed, it should not come as a surprise to this Committee that other tax policies - such as the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) only serve to remind physicians of the severity and inequity of the problem. GOODS AND SERVICES TAX (GST) In its 1997 report to the House of Commons the Standing Committee noted the concerns of the medical profession about the application of the GST and by 1998 indicated that this issue merits further consideration by the government. The CMA believes that it has rigorously documented its concerns and further study is not required (20) - the time has come for concerted action from the federal government to remove this tax impediment. [BOX CONTENT DOES NOT DISPLAY PROPERLY. SEE PDF FOR PROPER DISPLAY] [BOX END] When it comes to tax policy and the tax system in Canada, the CMA is strongly of the view that both should be administered in a fair and equitable manner. This principle-based statement has been made to the Standing Committee on a number of different occasions. While these principles are rarely in dispute, the CMA has expressed its strong concerns regarding their application - particularly in the case of the goods and services tax (GST) and the recently introduced harmonized sales tax (HST) in Atlantic Canada. By designating medical services as "tax exempt" under the Excise Tax Act, physicians are in the unenviable position of being denied the ability to claim a GST refund (i.e., input tax credits - ITCs) on the medical supplies necessary to deliver quality health care, and on the other, cannot pass the tax onto those who purchase such services. This is a critical point when one considers the raison-d'être of introducing the GST: to be an end-stage consumer-based tax, and not having a producer of a good or a service bear the full burden of the tax. Yet this tax anomaly does precisely that. As a result, physicians are "hermetically sealed" - they have no ability to claim ITCs due to the Excise Tax Act, or pass the costs to consumers due to the Canada Health Act. The CMA has never, nor is currently asking for, 'special treatment' for physicians under the Excise Tax Act. However, if physicians, as self-employed individuals are considered as small businesses for tax purposes, then it is clearly reasonable that they should have the same tax rules extended to them that apply to other small businesses. This is a fundamental issue of tax fairness. [BOX CONTENT DOES NOT DISPLAY PROPERLY. SEE PDF FOR PROPER DISPLAY] [BOX END] While other self-employed professionals and small businesses claim ITCs, an independent (KPMG) study has estimated that physicians have "overcontributed" in terms of unclaimed ITCs by $57.2 million per year. Furthermore, with the introduction of the HST in Atlantic Canada, KPMG has estimated that it will cost physicians an additional $4.686 million per year. By the end of this calendar year, physicians will have been unfairly taxed in excess of $500 million. As it currently applies to medical services, the GST is bad tax policy and the HST will make a bad situation much worse for physicians. There are other health care providers (e.g., dentists, physiotherapists, psychologists, chiropractors, nurses) whose services are categorized as tax exempt. However, there is an important distinction between whether the services are publicly insured or not. Health care providers who deliver services privately have the opportunity to pass along the GST costs through their fee structures. It must be remembered that physicians are in a fundamentally different position given that 99% of their professional earnings come from the government health insurance plans: under the GST and HST, "not all health care services are created equal". There are those who argue that the medical profession should negotiate the GST at the provincial/ territorial level, yet there is no province or territory that is prepared to cover the additional costs that are being downloaded onto physicians as a result of changes to federal tax policy. Nor do these governments feel they should be expected to do so. The current tax anomaly, as it affects the medical profession, was created with the introduction of the GST - and must be resolved at the federal level. The principles that underpin the fundamental issue of tax fairness outlined by Chief Justice Hall are unassailable and should be reflected in federal tax policy. Clearly, it is fairness, not special treatment that the profession is seeking. As it currently stands for medical services, the GST and HST is bad tax policy that does not reinforce good health care policy in Canada. The CMA strongly recommends: 9. That health care services funded by the provinces and territories be zero-rated. This recommendation would be accomplished by amending the Excise Tax Act as follows: (1). Section 5 part II of Schedule V to the Excise Tax Act is replaced by the following: "A supply (other than a zero-rated supply) made by a medical practitioner of a consultative, diagnostic, treatment or other health care service rendered to an individual (other than a surgical or dental service that is performed for cosmetic purposes and not for medical or reconstructive purposes)." (2). Section 9 Part II of Schedule V to the Excise Tax Act is repealed. (3). Part II of Schedule VI to the Excise Tax Act is amended by adding the following after Section 40: 41. A supply of any property or service but only if, and to the extent that, the consideration for the supply is payable or reimbursed by the government under a plan established under an Act of the legislature of the province to provide for health care services for all insured persons of the province. The CMA's recommendation fulfils at least two over-arching policy objectives: (1) it strengthens the relationship between good economic policy and good health policy in Canada; and (2) it applies the fundamental principles that underpin our taxation system (fairness, efficiency, effectiveness), in all cases. In this regard, the CMA is committed to working closely, and on an ongoing basis, with the government to develop collaborative solutions to this tax anomaly. DIFFUSION OF HEALTH TECHNOLOGIES Recently, concerns have been raised about the lack of access to necessary diagnostic and treatment technologies in Canada. Many of the technologies are essential in the early detection of cancers (e.g., breast, prostate, lung), tumours, circulatory complications (e.g., stroke, hardening of the arteries) and other illnesses. A recent study concluded that Canada is generally in the bottom third of OECD countries in availability of technology. Canada ranks 18th (of 29 OECD countries) in making available computed tomography; 19th (of 24 OECD countries) in lithotriptor availability; and 18th (of 27 OECD countries) in availability of magnetic reasonance imagers. Canada ranks favourably only in the availability of radiation equipment (5th out of 16 OECD countries). 21 [BOX CONTENT DOES NOT DISPLAY PROPERLY. SEE PDF FOR PROPER DISPLAY] [BOX END] Given the very real concerns that have been raised with regard to waiting lists across the country, Canadians deserve better when it comes to making available needed health technologies that can effectively diagnose and treat disease. Furthermore, it is clear that we must facilitate the diffusion of new cost-effective health technologies that are properly evaluated and meet defined standards of quality. While physicians are trained to provide quality medical care to all Canadians- they must, at the same time, have the "tools" to do so. In this context, the federal government should establish a National Health Technology Fund that would allow the provinces and territories to access funds. While the provinces and territories would be responsible for determining their respective technological priorities, the federal government would very clearly link the sources of funding with their intended uses, with full recognition for an essential investment in the health care of Canadians. The CMA recommends: 10. That the federal government establish a National Health Technology Fund to increase country-wide access to needed health technologies. The CMA is prepared to work closely with the federal government to assist in the development of objectives and deliverables of such a fund within a reasonable period of time. In so doing, the federal government would work in a strategic partnership with the provinces and territories such that monies from the fund to purchase equipment would be supported by ongoing operational resources at the site of delivery. VI. SYNCHRONIZING FEDERAL GOVERNMENT POLICY: WHERE FINANCE, ECONOMICS AND HEALTH CARE COME TOGETHER In appearing before the House of Commons Standing Committee on Finance, the CMA is well aware that policy considerations in finance and economics have an important and direct impact on the funding and delivery of health care in Canada. In the world of public policy, rarely are difficult decisions portrayed as simply being black or white. In most instances, where tough choices are made amongst a series of competing ends, they are often in varying shades of grey. While this is true when it comes to health care policy in Canada or any other discipline, it is important that it be placed in a broader context in terms of being consistent with, or reinforcing other good policy choices that have been implemented. This concept is critical to ensure that, if possible, all policy decisions are moving consistently in the same direction. In effect, synchronized in a way that the "policy whole" is greater than the sum of its individual parts. Such an approach also ensures that policy decisions taken in one sector are not countering decisions taken in other sectors. HEALTH RESEARCH IN CANADA In previous submissions to the Standing Committee on Finance, the CMA has encouraged the federal government to take the necessary steps to establish a national target and implementation plan for health research in Canada. [BOX CONTENT DOES NOT DISPLAY PROPERLY. SEE PDF FOR PROPER DISPLAY] [BOX END] The CMA was very encouraged with the federal government's announcement in last year's budget to set aside significant resources to develop the Canadian Institute for Health Research (CIHR). By 2001, funding for the CIHR is expected to increase to $484 million. The CMA was also pleased with the Minister's recent announcement to earmark $147 million to attract and retain health researchers in Canada. In offering a vision and structure to facilitate health research in Canada, the government should be congratulated. The CMA believes that significantly increasing funding in support of health research is of direct benefit to: (1) the health of Canadians; (2) Canada's health care system; and (3) to foster the development of health care as an industry. This is where good economic policy goes hand-in-hand with good health and health care policy in Canada. The CMA strongly supports the CIHR model and is prepared to work closely with government and others to do what is necessary to make this become a reality. Recognizing that Canada is moving into a new phase when it comes to funding and undertaking health research, the government is taking an important step to ensure our best and brightest medical scientists and health researchers are developed and remain in Canada. [BOX CONTENT DOES NOT DISPLAY PROPERLY. SEE PDF FOR PROPER DISPLAY] [BOX END] As a national organization representing the views of practising physicians across the country, the CMA strongly believes it has a meaningful contribution to make in moving the CIHR model forward. Specifically, in the areas of: * knowledge management (the CMA contributed greatly to stimulating clinical and health services research in Canada) * contributing to the research agenda (the CMA contributes to the research agenda in health services research, for example the Western Waiting List project funded by the Health Transition Fund) * ensuring quality peer-reviewed research (the CMA publishes the leading peer-reviewed medical journal in Canada) * research transfer (the CMA plays a leading role in developing tools to transfer research into practice - such as the Clinical Practice Guideline Database) * ethics (the CMA maintains a standing committee on ethics) * sustainability (the CMA has advocated for a strong Canadian presence in health research) While the CIHR will have a broad mandate for health research, physicians will have a key role to play in medical and health services research. The CMA looks forward to playing a more substantive role as the model moves to become reality. The CMA recommends: 11. That the federal government continue to increase funding for health research on a long-term, sustainable basis. TOBACCO CONTROL PROGRAMS Tobacco taxation policy should be used in conjunction with other strategies for promoting health public policy, such as public education programs to reduce tobacco use. The CMA continues, however, to maintain that a time-limited investment is not enough. Substantial and sustainable fund-ing is required for programs in prevention and cessation of tobacco use. 22 [BOX CONTENT DOES NOT DISPLAY PROPERLY. SEE PDF FOR PROPER DISPLAY] [BOX END] A possible source for this type of program investment could be tobacco tax revenues or the tobacco surtax. The CMA believes that that the federal government should designate 0.6 cents per cigarette sold to a fund to defray the costs of tobacco interventions, including those provided by physicians with the expertise in the treatment of nicotine addiction. This would generate approximately $250 million per year to help smokers quit. 23 The CMA recommends: 12. That the federal government commit stable funding for a comprehensive tobacco control strategy; this strategy should ensure that the funds are invested in evidence-based tobacco control projects and programs, which would include programs aimed at prevention and cessation of tobacco use and protection of the public from tobacco's harmful effects. 13. That the federal government support the use of tobacco tax revenues for the purpose of developing and implementing tobacco control programs. 14. That the federal government place a high priority for funding tobacco prevention and evidence-based cessation programs for young Canadians as early as primary school age. TOBACCO TAXATION POLICY Smoking is the leading preventable cause of premature mortality in Canada. The most recent estimates suggest that more than 45,000 deaths annually in Canada are directly attributable to tobacco use. The estimated economic cost to society from tobacco use in Canada has been estimated from $11 billion to $15 billion. 24 Tobacco use directly costs the Canadian health care system $3 billion to $3.5 billion (25) annually. These estimates do not consider intangible costs such as pain and suffering. CMA is concerned that the 1994 reduction in the federal cigarette tax has had a significant effect in slowing the decline in cigarette smoking in the Canadian population, particularly in the youngest age groups - where the number of young smokers (15-19) is in the 22% to 30% range and 14% for those aged 10-14. 26 A 1997 Canada Health Monitor Survey found that smoking among girls 15-19 is at 42%. 27 A Quebec study found that smoking rates for high school students went from 19% to 38%, between 1991 and 1996. 28 The CMA congratulates the federal government's initiatives to selectively increase federal excise taxes on cigarettes and tobacco sticks. This represents the first step toward the development of a federal integrated tobacco tax strategy, and speaks to the importance of strengthening the relationship between good health policy and good tax policy in Canada. The CMA understands that tobacco tax strategies are extremely complex. Strategies need to consider the effects of tax increases on reduced consumption of tobacco products with increases in interprovincial/ territorial and international smuggling. In order to tackle this issue, the government could consider a selective tax strategy. This strategy requires continuous stepwise increases to tobacco taxes in those selective areas with lower tobacco tax (i.e., Ontario, Quebec and Atlantic Canada). The goal of selective increases in tobacco tax is to increase the price to the tobacco consumer over time (65-70% of tobacco products are sold in Ontario and Quebec). The selective stepwise tax increases will approach but may not achieve parity amongst all provinces; however, the tobacco tax will attain a level such that interprovincial/territorial smuggling would be unprofitable. The selective stepwise increases would need to be monitored so that the new tax level and US/Canadian exchange rates do not make international smuggling profitable. The selective stepwise increase in tobacco taxes can be combined with other tax strategies. The federal government should be congratulated for reducing the export exemption available on shipments in accordance with each manufacturers' historic levels, from 3% of shipments to 2.5%. However the CMA believes that the federal government should remove the exemption. The objective of implementing the export tax would be to make cross-border smuggling unprofitable. The federal government should establish a dialogue with the US federal government. Canada and the US should hold discussions regarding harmonizing US tobacco taxes with Canadian levels at the factory gate. Alternatively, Canadian tobacco tax policy should raise price levels such that they approach US tobacco prices. The CMA therefore recommends: 15. That the federal government follow a comprehensive integrated tobacco tax policy (a) To implement selective stepwise tobacco tax increases to achieve the following objectives: (1) reduce tobacco consumption, (2) minimize interprovincial/territorial smuggling of tobacco products, and (3) minimize international smuggling of tobacco products; (b) To apply the export tax on tobacco products and remove the exemption available on tobacco shipments in accordance with each manufacturers' historic levels; and (c) To enter into discussions with the US federal government to explore options regarding tobacco tax policy, raising Canadian tobacco price levels in line with or near the US border states, in order to minimize international smuggling. REGISTERED RETIREMENT SAVINGS PLANS (RRSPS) There are at least two fundamental goals of retirement savings: (1) to guarantee a basic level of retirement income for all Canadians; and (2) to assist Canadians in avoiding serious disruption of their pre-retirement standard of living upon retirement. Reviewing the demographic picture in Canada, we know that an increasing portion of society is not only aging, but is living longer. Assuming that current trends will continue and peak in the first quarter of the next century, it is important to recognize the role that private RRSP savings will play in ensuring that Canadians may continue to live in dignity well past their retirement from the labour force. In its 1996 budget statement, the federal government announced that the contribution limits of RRSPs was to be frozen at $13,500 through to 2002/03, with increases to $14,500 and $15,500 in 2003/04 and 2004/05 respectively. As well, the maximum pension contribution limit for defined benefit registered pension plans will be frozen at its current level of $1,722 per year of service through 2004/05. This is a de facto increase in tax payable. This policy runs counter to the 1983 federal government White Paper on The Tax Treatment of Retirement Savings where the House of Commons Special Committee on Pension Reform recommended that the limits on contributions to tax-assisted retirement savings plans be amended so that the same comprehensive limit would apply regardless of the retirement savings vehicle or combination of vehicles used. In short, the principle of 'pension parity' was explicitly recognized and endorsed. Since that time, in three separate papers released by the federal government (1983, 1984, 1987), the principle of pension parity would have been achieved between money-purchase (MP) plans (i.e., RRSPs) and defined-benefit (DB) plans (i.e., Registered Pension Plans) had RRSP contribution limits risen to $15,500 in 1988. As a founding member of the RRSP Alliance, the CMA, along with others has been frustrated that eleven years of careful and deliberate planning by the federal government around pension reform has not come to fruition. In fact, if the current policy remains in place it will have taken more than 17 years to implement needed reforms to achieve parity (from 1988 to 2005). While pension parity will be achieved between RRSP plans and RPP plans in 2004/05, it will have been accomplished on the backs of Canadians whose RRSP contribution levels have been frozen for far too long. As a consequence, the current policy of freezing RRSP contribution limits and RPP limits without adjusting the RRSP contribution limits to achieve pension parity serves to maintain inequities between the two plans until 2004/05. This situation is further compounded by the implementation of this policy because the RRSP/RPP plans are frozen and therefore unable to grow at the rate in the yearly maximum pensionable earnings (YMPE) Specifically, if the recommended policy of pension parity had been implemented in 1988, the growth in RRSP and RPP contribution limits could have grown in line with the yearly maximum pensionable earnings - and would be approximately $21,000 today. [TABLE CONTENT DOES NOT DISPLAY PROPERLY. SEE PDF FOR PROPER DISPLAY] TABLE 2 - RRSP Contribution Limits Adjusted by the Yearly Maximum Pensionable Earnings (YMPE Earnings (YMPE) Year YMPE % change RRSP Limits 1988 $27,700 $15,500 1989 $28,500 2.89 $15,948 1990 $28,900 1.40 $16,171 1991 $30,500 5.54 $17,067 1992 $32,200 5.57 $18,018 1993 $33,400 3.73 $18,690 1994 $34,400 2.99 $19,249 1995 $34,900 1.45 $19,529 1996 $35,400 1.43 $19,809 1997 $35,800 1.13 $20,032 1998 $36,900 3.07 $20,648 1999 $37,400 1.36 $20,928 YMPE Source: Revenue Canada, April 1999 [TABLE END] Each year the Department of Finance publishes revenue cost to the federal treasury of a number of policy initiatives. For RRSP contributions, the net tax expenditure (i.e., tax revenue not collected) is estimated to be $7.5 billion in 1998. The net tax expenditure associated with registered pension plans is estimated to be $6.2 billion in 1998. In this context, it is critical to understand the difference between tax avoidance and tax deferral. RRSPs allow Canadians to set aside necessary resources to provide for their retirement years. In the medium and longer-term, when RRSPs are converted to annuities, they bring increased tax revenues to government. While current contributions exceed withdrawals, this will not continue indefinitely as the baby boom generation retires at an accelerated rate. In sum, at a time when the government is reviewing the role of public benefits in society, there is a social responsibility placed on government to ensure a stable financial planning environment is in place which encourages greater self-reliance on private savings for retirement. From the standpoint of synchronizing good tax policy with good social policy, it is essential that the RRSP system be expanded such that it gives Canadians the means and incentive to prepare for retirement, while at the same time, lessening any future burden on public programs. The CMA recommends: 16. That the dollar limit of RRSPs at $13,500 increase to $15,500 for the year 2000/01. 17. That the federal government explore mechanisms to increase RRSP contribution limits in the future given the delay in achieving pension parity, since 1988. Under current federal tax legislation, 20% of the cost of an RRSP, RRIF or Registered Pension Plan's investments can be made in 'foreign property'. The rest is invested in 'Canadian' investments. If the 20% foreign content limit is exceeded at the end of a month, the RRSP pays a penalty of 1% of the amount of the excess. In its December 1999 pre-budget consultation, the Standing Committee on Finance made the following recommendation (p. 58): "The Committee recommends that the 20% Foreign Property Rule be increased in 2% increments to 30% over a five year period. This diversification will allow Canadians to achieve higher returns on their retirement savings and reduce their exposure to risk, which will benefit all Canadians when they retire." A study by Ernst and Young demonstrated that Canadian investors have experienced substantially better investment returns over the past 20 years with higher foreign content limits. As well, the Conference Board of Canada concluded that lifting the foreign content limit to 30% would have a neutral effect on Canada's economy. The CMA strongly supports the Standing Committee's position that there is sufficient evidence to indicate that Canadians would benefit from an increase in the Foreign Property Rule, from 20% to 30%. The CMA therefore recommends: 18. That the 20% Foreign Property Rule for deferred income plans such as Registered Retirement Savings Plans and Registered Retirement Income Funds be increased in 2% annual increments to 30% over a five year period, effective the year 2000. As part of the process to revitalize and sustain our economy, greater expectations are being placed on the private sector to create long-term employment opportunities. While this suggests that there is a need to re-examine the current balance between public and private sector job creation, the government nonetheless has an important responsibility in fostering an environment that will accelerate job creation. In this context, the CMA strongly believes that current RRSPs should be viewed as an asset rather than a liability. With proper mechanisms in place, the RRSP pool of capital funds can play an integral role in bringing together venture capital and small and medium-size business and entrepreneurs. The CMA would encourage the federal government to explore current regulatory impediments to bring together capital with small and medium-size businesses. The CMA recommends: 19. That the federal government explores the regulatory changes necessary to allow easier access to RRSP funds for investment in small and medium-size businesses. Currently, if an individual declares bankruptcy, creditors are able to launch a claim against their RRSP or RRIF assets. As a consequence, for self-employed Canadians who depend on RRSPs for retirement income, their quality of life in retirement is at risk. In contrast, if employees declare bankruptcy, creditors are unable to lay claim on their pensionable earnings. This is an inequitable situation that would be remedied if RRSPs were creditor-proofed. The CMA recommends: 20. That the federal government undertake the necessary steps to creditor-proof RRSPs and RRIFs. ENDNOTES: 1. It is important to keep in mind that in addition to the CHST, a separate accounting procedure was established through what is called a CHST Supplement. The Supplement, which totals $3.5 billion, was charged to the 1998 federal government public accounts, but is allocated over a three-year period (i.e., $2.0 billion, $1.0 billion, and $0.5 billion). However, at any point in time, a province or territory can take its portion of the $3.5 billion. 2. The $2.5 billion dollars to be reinvested represents the amount of federal cash that was removed with the introduction of the Canada Health and Social Transfer (CHST) beginning in April 1996 through to 1998. The amount is calculated on the basis of the recent historical federal cash allocation (approximately 41%) under EPF and CAP (now the CHST) to health care as a proportion of the $6.0 billion required to restore the CHST cash floor to $18.5 billion (1995/96 level). 3. The data sources for Figure 1 are: (1) CHST: Canadian Medical Association, Looking Toward Tomorrow, September 1998, p. 4.; (2) Historical national cash transfer to health from Established Programs Financing Reports, Federal-Provincial Relations Division, Department of Finance; (3) Population Statistics: Statistics Canada Catalogue no. 91-213; (4) CPI annual % change: Source for 1990-96 is Canadian Economic Observer, cat. No. 11-210-XPB, Historical Statistical Supplement 1996/97, p. 45. For 1996, 1997 and 1998 the source is Canadian Economic Observer, cat. No. 11-010-XPB, April 1999. For 1999 and 2000 the source is Royal Bank of Canada Econoscope, May 1999, p.14. For 2001, 2002 and 2003 CPI % change is assumed to stay constant at the 2000 level of 1.3%. 4. Thomson A. Federal Support for Health Care. Health Action Lobby. June 1991, p. 13. 5. Statistics Canada, Population Projections for Canada, Provinces and Territories, Medium Growth Scenario, 1993-2016, December, 1994 (Catalogue #91-520). 6. Health Canada. National Health Expenditures in Canada, 1975-1994. January 1996. 7. 1998 Report of the Auditor General of Canada, Chapter 6, Population Aging and Information for Parliament: Understanding the Choices, April. WWW: http://www.oag-bvg.gc.ca/domino/reports.nsf/html/9860xe12.html, available on 06/09/99 at 17:38:37. 8. Maintaining Prosperity in an Ageing Society. Organization for Economic Cooperation and Development, Paris, 1998. 9. The Fiscal Monitor, Department of Finance. August 1999. Current Analysis, The Royal Bank of Canada, August 1999. The Bank estimates that the fiscal dividend will reach $25.9 billion in 2004/05, and $41.2 billion in 2007/08. 10. Facing the Future - Challenges and Choices for A New Era. Report of the Standing Committee on Finance, December 1998, p. 30-31. 11. Green JP, MacBride-King J. Corporate Health Care Costs in Canada and the U.S.: Does Canada's Medicare System Make a Difference? Conference Board of Canada, 1999. Purchase B. Health Care and Competitiveness. School of Policy Studies, Queen's University, 1996. KPMG. The Competitive Alternative: A Comparison of Business Costs in Canada and the United States, 1996. Amanor-Boadu, Martin LJ. Canada's Social Programs, Tax System and the Competitiveness of the Agri-Food Sector, Guelph, Agri-Food Competitiveness Council, 1994. 12. Green JP, MacBride-King J. Corporate Health Care Costs in Canada and the U.S.: Does Canada's Medicare System Make a Difference? Conference Board of Canada, 1999. 13. KPMG. The Competitive Alternative: A Comparison of Business Costs in Canada and the United States, 1996. 14. Baillie C. Health Care in Canada: Preserving a Competitive Advantage, Speech to the Vancouver Board of Trade, April, 1999. 15. National Angus Reid Poll, 1998. 16. National Angus Reid Poll, 1999. 17. Canadian Medical Association. The 1991 Survey of Physicians in Rural Medical Practice, 1991. Canadian Medical Association. Survey on Rural Medical Practice in Canada, 1999. 18. Presentation by Statistics Canada Officials to the Standing Committee on Industry, May 1999. 19. Business Council on National Issues: Creating Opportunity, Building Prosperity. October 1998, p. 6. 21. KPMG, Review of the Goods and Services Tax on Canadian Physicians, June 12, 1992. KPMG, Review of the Impact of a Provincial Value Added Tax on Physicians in New Brunswick, Nova Scotia and Newfoundland, August 12, 1996. 21. Harriman D, McArthur W, Zelder M. The Availability of Medical Technology in Canada: An International Comparative Study. The Fraser Institute. August 1999. 22. In California, between 1988 and 1993, when the state was carrying on an aggressive public anti-smoking campaign, tobacco consumption declined by over 25%. Goldman LK, Glantz SA. Evaluation of Antismoking Advertising Campaigns. JAMA 1988; 279: 772-777. 23 In 1998, 45.613 billion cigarettes were sold in Canada. Statistics Canada, Catalogue #32-022, December, 1998. In 1997/98, total tobacco revenues were $2.04 billion, Public Accounts, Volume II, Part 1, Excise Tax Revue. The rationale for 0.6 cents per cigarette is based on a total amount of 25 cents per pack, of which the federal and provincial/territorial governments would contribute on an equal basis (i.e., 12 cents each). Recently, California passed Proposition 99 which added 25 cents to each pack of cigarettes. 24. Health Canada, Economic Costs Due to Smoking (Information Sheet). Ottawa: Health Canada, November 1996. 25. Health Canada, Economic Costs Due to Smoking (Information Sheet). Ottawa: Health Canada, November 1996. 26. Health Canada, Youth Smoking Behaviour and Attitudes (Information Sheet). Ottawa: Health Canada, November 1996. 27. Canada Health Monitor, Highlights Report, Survey #15. Price Waterhouse, January-February 1997. 28. Editorial. Raise Tobacco Taxes. The Gazette [Montreal] 1997 Sept 23. Sect B:2.
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