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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 Finance on Bill C-38

https://policybase.cma.ca/en/permalink/policy10441
Date
2012-05-31
Topics
Health systems, system funding and performance
  1 document  
Policy Type
Parliamentary submission
Date
2012-05-31
Topics
Health systems, system funding and performance
Text
Thank you for this opportunity to appear before this committee on behalf of the CMA and its 76,000 members. Canadians believe that transforming our health care system to meet the needs of 21st century Canada must be among the highest priorities for all levels of government, including the federal government. I would like to begin by commenting on the health transfer framework announced by the Minister of Finance in December. This announcement provided some predictability for the years ahead. However, with the federal government reducing its involvement in several areas affecting health or health care, added costs will end up in the laps of the provinces and territories. So while this budget may enhance the federal government's fiscal prospects, it will do so to the detriment of the provinces and territories. But there's more to this debate than funding. We believe that Canadians would be better served if federal health care transfers came with specific guidelines ensuring that the system provides care of comparable access and quality to Canadians across the country, regardless of their circumstances. We are encouraged that the Minister of Health has indicated she wants to collaborate with the provinces and territories on developing accountability measures to ensure value for money and better patient care. We look forward to the minister's plan for accountability. This budget is notable for other missed opportunities. For many years, groups across the political spectrum have called for a pharmaceutical strategy to reduce national disparities. In fact, such a strategy was committed to by governments under the 2004 Health Accord. Minister Kenney referred to this issue indirectly when he said the recent cancellation of supplemental health benefits for refugee claimants is justified because refugees should not have access to drug coverage that Canadians do not have. Rather than cutting off those desperately vulnerable people, Canada's physicians urge the federal government to work with the provinces and territories to develop a plan that ensures all Canadians have a basic level of drug coverage. Indeed, we now appear to be in a race to the bottom in the way we treat vulnerable groups - by, for example, deferring Old Age Security for two years; and changing service delivery to veterans, mental health programs for our military and the Employment Insurance program. Significant policy changes have been announced since the budget, with little opportunity for debate and little evidence provided. We note, as well, the lack of open consultation with Canadians on matters of great import to their lives. Successful policy requires buy-in, which is best achieved when those interested are able to participate in the policy-making process. This brings me to a wider concern shared by our members - that policy-makers are not paying adequate attention to the social determinants of health, factors such as income and housing that have a major impact on health outcomes. We remind the government that every action that has a negative effect on health will lead to more costs to society down the road. The federal government is the key to change that benefits all Canadians. While there are costs and jurisdictions to consider, the CMA believes the best way to address this is to make the impact on health a key consideration in every policy decision that's made. The federal government has used this approach in the past, in considering rural Canadians, for example. We therefore call for a new requirement for a health impact assessment to be carried out prior to any decision made by cabinet. This would require that, based on evidence, all cabinet decisions take into account possible impacts on health and health care, and whether they contribute to our country's overall health objectives. A similar model is in use in New Zealand and some European countries. For instance, what health impact will cuts in funding to the tobacco strategy have? Such an assessment would in particular have a dramatic impact with regard to poverty. Poverty hinders both human potential and our country's economic growth - and needlessly so as there are many ways to address it effectively. The National Council on Welfare - which will disappear as a result of this budget - reported last fall that the amount it would have taken in 2007 for every Canadian to have an income over the poverty line was $12.6 billion, whereas the consequences of poverty that year added up to almost double that figure. Close to 10 per cent of Canadians were living in poverty in 2009, many of them children, as UNICEF underlined yesterday. This is a huge challenge for our country. In closing, as this budget cycle ends and as you begin to prepare for the next, please bear in mind that as prosperous as our country is, if we do nothing for the most vulnerable in our society - children, the elderly, the mentally ill, Aboriginal peoples - we will have failed. Thank you.
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CMA's Response to Questionnaire From the House of Commons Standing Committee on Finance: 2012-2013 Pre-Budget Consultation

https://policybase.cma.ca/en/permalink/policy10445
Date
2012-08-03
Topics
Health systems, system funding and performance
  1 document  
Policy Type
Parliamentary submission
Date
2012-08-03
Topics
Health systems, system funding and performance
Text
Question 1: Economic recovery and growth (What federal measures are required for sustained economic recovery and growth?) The health sector has an important role in sustaining Canada's economic recovery and enhancing economic growth beginning with supporting a healthy and productive workforce and providing over one million high value jobs, representing about 10 per cent of the labour force. Despite the importance of the sector, there is general agreement that Canada's health care system is no longer a strong performer when compared to similar nations. While the OECD's 2011 Health Data ranks Canada 7th highest of 34 member states in per capita health care spending, the performance of Canada's health care system continues to rank below most of our comparator countries. Health spending accounts for an increasing proportion of provincial and territorial budgets, and many warn of increasing future demands on the overall system. In his Economic and Fiscal Outlook Report of May 17, 2012, the Parliamentary Budget Officer stated that "the provincial-territorial long-term fiscal situation has deteriorated." Taken together, these issues highlight significant potential for the health sector, through efficiency improved gained by health care transformation, to support long-term economic recovery and growth in Canada. While the provinces and territories have initiated positive steps to collaborate on sharing best practices, there are key responsibilities under federal leadership that would contribute to these efforts by addressing the overall performance of the health care system in Canada. The CMA recommends that: - The federal government recognize the relationship of the social determinants of health on the demands of the health care system and that it implement a requirement for all cabinet decision-making to include a Health Impact Assessment (see Question 5 for more detail). - Further to the comments by the Health Minister following the new fiscal arrangement announcement, the federal government should prioritize federal-provincial-territorial engagement focused on accountability and undertake a consultative process with the aim of identifying pan-Canadian metrics and measurement that will link health expenditures and comparable health outcomes. Question 2: Job creation (What federal actions should be taken to promote job creation in a context of enhanced internal and international trade?) A high performing health care system across the country will help support labour mobility and job creation. An effective, comprehensive public health care system provides an important international competitive advantage. The contribution of Canada's health care system to the international competitiveness of our economy has been repeatedly demonstrated in KPMG's Competitive Alternatives report. However, there are several signs that indicate health care services and coverage are not keeping up with Canadians' needs and vary depending on where one lives in Canada. For instance, long wait times for medical care can be found in smaller provinces, while drug coverage and services for seniors are particularly poor in Atlantic Canada. Wide variation in access to pharmaceutical treatments remains the most glaring example of inequity in our health care system-all Canadians should have a basic level of drug coverage. These variations are growing and will hinder job creation in some regions, serving as barriers to labour mobility for Canadians wishing to seek work elsewhere in the country. We believe that Canadians would be better served if federal health care transfers came with specific guidelines ensuring that the system provides care of comparable access and quality to Canadians across the country, regardless of their circumstances. Recognizing the contribution of the health care system to Canada's international competitive advantage, improvements in Canada's health care system would further support job creation. The federal government should focus its efforts towards supporting the transformation of our health care system to better meet the objectives of better care, better health and better value. The CMA recommends that: - The federal government, in consultation with provincial, territorial and other stakeholders, establish a program of comprehensive prescription drug coverage to be administered through reimbursement of provincial/territorial and private prescription drug plans to ensure that all Canadians have access to medically necessary drugs. - The federal government, together with the provinces and territories, develop and implement a pan-Canadian strategy for continuing care which would integrate home care and facility- based long-term, respite and palliative care services fully within health care systems. Question 3: Demographic change (What federal measures should be implemented to help address the aging population and skills shortages?) The CMA remains concerned about the status of Canada's retirement income system and the ability of Canada's seniors to adequately fund their long-term and supportive care needs. Steps need to be taken to ensure that Canada is prepared to handle the long-term care needs of its citizens, including the funding of necessary infrastructure and additional support for both health care providers and informal caregivers. The availability of long-term care facilities has an important role in the efficiency of the overall health care system. For example, in its most recent report, the Wait Time Alliance noted that dementia is a key diagnosis related to the rise in alternate-levels-of-care (ALC) patient stays in hospitals. This is yet another issue facing all provinces and territories for which the federal government is well positioned to coordinate a pan-Canadian strategy. In addition, as part of the next long-term infrastructure program, the federal government should include a targeted health sector infrastructure fund for long-term care facilities as part of a pan-Canadian strategy to redirect care from the hospitals to homes, communities and long-term care facilities, where better care is provided at a lower cost. The CMA recommends that: - The federal government establish programs to encourage Canadians to save for their long- term care needs by pre-funding long-term care, including private insurance, tax-deferred and tax-prepaid savings approaches, and contribution-based social insurance, such as an RESP- type savings vehicle. - That a targeted health infrastructure fund be established as part of the government's long- term plan for public infrastructure. The purpose of this fund would be to address infrastructure shortages in the health sector that prevent the optimization of health human resources and exacerbate wait times. The CMA has supported the federal government's efforts to expand retirement savings options by establishing the Pooled Retirement Pension Plans. However, as highlighted by federal, provincial and territorial finance ministers, this is only one component of a larger pension reform framework to address the retirement income adequacy needs of Canadians. The CMA encourages the federal government to continue working with the provinces, territories and stakeholders to implement all elements of this framework. Question 4: Productivity (What federal initiatives are needed to increase productivity in light of labour market challenges such as the aging of Canada's population?) An effective and comprehensive health care system supports the productivity of the Canadian workforce. Failure of our health care system to respond to workers' health needs, on the other hand, leads to loss of productivity and high costs both in terms of lost income for Canadian families as well as foregone tax revenues for governments. Numerous studies have pointed out the enormous cost of waiting (in the billions of dollars per year) affecting both individuals and the economy. Another related issue that has the potential to increasingly affect productivity is the burden of providing care to family members. Without adequate provision of long-term care resources and support for home care, Canada's labour force may experience a productivity drag through increased leaves and absenteeism to care for elderly relatives. The 2011 federal budget took a first step at providing tax relief for informal caregivers through the Family Caregiver Tax Credit. However, this credit of a maximum of $300 per year by no means provides sufficient support for informal caregivers. A 2004 Canadian study estimated that the annual cost of a caregiver's time at market rates for moderately to severely disabled home care clients ranged from $5,221 to $13,374 depending on the community in which they reside. An increase to the Family Caregiver Tax Credit is positive for the development of one aspect of the necessary support informal caregivers require but the CMA believes other enhancements will also be needed in the coming years. In order to meet the needs of our country's aging population, the CMA recommends that: - The federal government expand the relief programs for informal caregivers to provide guaranteed access to respite services for people dealing with emergency situations, as well as increase the Family Caregiver Tax Credit to better reflect the annual cost of family caregivers' time at market rates. - That a targeted health infrastructure fund be established as part of the government's long-term plan for public infrastructure. The purpose of this fund would be to address infrastructure shortages in the health sector that prevent the optimization of health human resources and exacerbate wait times. Question 5: Other challenges (Who is facing most challenges, what are they and what federal action is required?) Despite significant investments in health and improvements in medical treatment and technologies, health outcomes in Canada have not been moving in the right direction. Chronic diseases such as diabetes and the corresponding risk factors, among them obesity, continue to rise. These negative outcomes can have a significant impact on the prosperity of the country as health is necessary for individuals to lead a prosperous and autonomous life. Research suggests that 50 per cent of population health is determined by our social and economic environment. While a strong health care system is vital, changes to medicare alone will not improve health outcomes or reduce the disparities that currently exist in disease burden and health risks. What is needed is a process to address the social determinants of health that can be barriers or enablers to health, a process to ensure healthy public policy for all Canadians. A Health Impact Assessment (HIA) is a systematic process for making evidence-based judgments on the health impacts of a policy and to identify and recommend strategies to protect and promote health. HIA is used in several countries, including Australia, New Zealand, Norway, the Netherlands and the United States. HIA is also used in Canada, most extensively for policy appraisals in Quebec. HIA is necessary for ensuring that all government departments are able to consider the health impacts of their work. Such a tool would have been very beneficial in assessing cuts to program spending to ensure the impact on health would not be counterproductive (i.e., lead to higher overall costs to society once the health impact is taken into account). The adoption of an evidence-based HIA is one way in which the federal government can play a leadership role in health care. The CMA recommends that: - The federal government include a Health Impact Assessment as part of its policy development process to ensure that the health of Canadians is a key factor in every policy decision it makes. - The federal government recognize the relationship of the social determinants of health on the demands of the health care system.
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CMA's Submission to Finance Canada's 2012 Pre-budget Consultations

https://policybase.cma.ca/en/permalink/policy10350
Date
2012-01-12
Topics
Health systems, system funding and performance
  1 document  
Policy Type
Parliamentary submission
Date
2012-01-12
Topics
Health systems, system funding and performance
Text
The Canadian Medical Association (CMA) appreciates the opportunity to provide additional comments and recommendations as part of Finance Canada's 2012 pre-budget consultations. The health sector provides essential services and high value jobs supporting communities across Canada. Statistics Canada reports that employment in the health sector accounts for 10% of the Canadian labour force.i In considering possible additional economic stimulus measures that build on the success of Canada's Economic Action Plan, the CMA encourages the federal government to consider investments that target efficiency improvements in the health sector. Efficiency improvements in the health sector yield benefits to all orders of government and Canadians. The following recommendations are advanced for Finance Canada's consideration: * In order to improve the delivery of better care, better health, and better value, the CMA recommends that the federal government work with the provinces, territories and health sector stakeholders to develop a model for accountability and patient-centred care. The CMA encourages the federal government to adopt the Principles to Guide Health Care Transformation, developed by the CMA together with the Canadian Nurses Association and since endorsed by over 60 organizations, as the basis of a pan-Canadian model for accountability and patient-centred care. * Recognizing the significance of nationally comparable metrics on health outcomes and the health care system together with the effectiveness of national public reporting in demonstrating accountability, the CMA recommends that the federal government undertake efforts towards identifying pan-Canadian metrics and measurement that will link health care expenditures to comparable health outcomes. * As the federal government prepares to engage with the provinces and territories to further map out improvements to Canada's health system, the CMA strongly encourages consideration be given to the federal role in coordinating the development of pan-Canadian clinical practice guidelines (CPGs). * While, as previously indicated, the CMA supports the federal government's proposal to expand access to pensions, specifically by developing pooled registered retirement plans (PRPPs), the limitations to PRPPs should be addressed to ensure that they provide value to self-employed Canadians, including physicians. Specifically, addressing the limitations would include: (1) expanding the PRPP framework to include defined benefit and targeted benefit pension plans; (2) increasing the retirement savings capacity of self-employed individuals by either raising the RRSP limit or providing a distinct limit for PRPPs; and, (3) ensuring the PRPP framework expands the eligibility of administrators beyond financial institutions. Introduction The Canadian Medical Association (CMA) appreciates the opportunity to provide additional recommendations to the Government of Canada as part of its 2012 Pre-Budget consultation. Building upon the CMA's recommendations to the House of Commons' Finance Committee, this submission focuses on three issues: (1) improving accountability and patient-centred care in the delivery of new federal health care funding; (2) coordinating the development of pan-Canadian clinical practice guidelines; and (3) addressing limitations in the federal framework for pension reform. 1. Accountability and patient-centred care "Raising sufficient money for health is imperative, but just having the money will not ensure universal coverage. Nor will removing financial barriers to access through prepayment and pooling. The final requirement is to ensure resources are used efficiently." World Health Organization (2010) As the federal government finalizes the Strategic and Operating Review and considers other measures to eliminate the deficit, including scaling down the Economic Action Plan, it must be recognized that improved health systems and the resultant improved productivity pay economic dividends for the country; and, further, that "health" by today's standards is not just the assessment and treatment of illness, but also the prevention of illness, and the creation and support of social factors that contribute to health should also be considered. With the recent announcement by Minister Flaherty with respect to the Canada Health Transfer (CHT) and Canada Social Transfer (CST), the financial parameters for future health care funding have been established. Consistent with previous public opinion research, recent polling by Ekos Research Associates shows that 76% of Canadians identify improving health care as the leading priority for the federal government, ahead of reducing the national debt and deficit.ii However, as we have learned with the 2004 Health Accord, funding alone is not sufficient to ensure Canadian taxpayers benefit from improvements in health care, health outcomes, and value for money. Despite laying out laudable objectives, progress to improve our health care system has been slow following the 2003 and 2004 agreements. There is a general agreement that Canada's health care system is no longer a strong performer when compared to similar nations. The OECD's Health Data, 2011 ranks Canada eighth highest of 34 member states in per capita health care spending, the second highest in hospital spending per discharge, and the seventh lowest in the number of physicians per capita. While Canada outperforms the U.S. on most measures, we fall below the median performance of the OECD on common health quality and system measures. With the new health care funding commitment to 2024, it is now time to plan how to transform the health care system. Principles-based approach is required The CMA is advocating built-in accountability mechanisms to ensure Canada's health care system is focused on delivering improved patient outcomes. Developing a system that is accountable and patient-centred depends on continuously striving to achieve the Institute for Healthcare Improvement's (IHI) Triple Aim objectives of better care, better health and better value. Launched in 2007, the IHI Triple Aim initiative was designed to direct the improvement of the patients' experience of care (including quality, access, and reliability) while lowering the per capita cost of care. It was with the Triple Aim objectives in mind that the CMA jointly developed Principles to Guide Health Care Transformation in Canada with the Canadian Nurses Association (CNA). It is our strong belief that discussions about the future of health care in Canada must be guided by these principles. The CMA-CNA principles are summarized as follows: * Patient-centred: Patients must be at the centre of health care, with seamless access to the continuum of care based on their needs. * Quality: Canadians deserve quality services that are appropriate for patient needs, respect individual choice and are delivered in a manner that is timely, safe, effective and according to the most currently available scientific knowledge. * Health promotion and illness prevention: The health system must support Canadians in the prevention of illness and the enhancement of their well-being, with attention paid to broader social determinants of health. * Equitable: The health care system has a duty to Canadians to provide and advocate for equitable access to quality care and commonly adopted policies to address the social determinants of health. * Sustainable: Sustainable health care requires universal access to quality health services that are adequately resourced and delivered across the board in a timely and cost-effective manner. * Accountable: The public, patients, families, providers and funders all have a responsibility for ensuring the system is effective and accountable. In order to ensure that future federal funding delivers on the Triple Aim objectives of better care, better health and better value, a model for accountability and patient-centred care is required. Such a model would expand upon the CMA-CNA Principles through the development of a set of measurable indicators related to each principle that can be used for setting national standards, monitoring progress and demonstrating accountability to Canadians. The CMA therefore urges the federal government to facilitate discussions with the provinces and territories to identify how resources will be used to improve patient care and health outcomes across the country. To this end, the CMA has urged the Minister of Health to move quickly to engage the provincial and territorial health ministers on transforming the health care system. The CMA recommends that the federal government work with provinces and territories, in consultation with national health sector stakeholders, to develop a model for accountability and patient-centred care. The CMA encourages the federal government to adopt the CMA-CNA Principles to Guide Health Care Transformation as the basis of a pan-Canadian model for accountability and patient-centred care. Improving public reporting: The cornerstone of accountability The federal government has a significant stake in national public reporting on the health of Canadians and on the performance of the health care system. As required by the Canada Health Act, the Minister of Health must publicly report administration, operation and adherence to the Act each year. Further, as the largest contributor to the single-payer system, the federal government has a unique role in demonstrating value for money and reporting on strategies to improve the quality, effectiveness and sustainability of the health care system. To facilitate public reporting, in addition to Statistics Canada, the federal government is supported by the Health Council of Canada and the Canadian Institute for Health Information, both established as government-funded non-profits, however, with distinct mandates. Despite pan-Canadian efforts such as provincial health quality councils and federal and non-governmental reporting, there remains significant room for improvement in the area of monitoring and reporting, both on health outcomes and system performance. As noted in the Commonwealth Fund's report on international health care systems, "reporting on health system performance [in Canada] varies widely across the provinces and territories...there is so far little connection between financial rewards and public reporting of performance." Not surprising, this issue was also identified by the Health Council of Canada in its Progress Report 2011. It highlights the challenges in reporting progress and explains the difficulties inherent to the current patchwork, "[w]here provinces and territories had set and publicized targets, it was easier for us to track progress. Where we could not find targets, assessing progress was more difficult." The CMA has long supported improved pan-Canadian public reporting on health and health care. Most recently, the CMA hosted a symposium with health reporting stakeholders to discuss the current status of national reporting and the need for the development of a pan-Canadian reporting framework. As recognized by the symposium's participants, there is a great deal of excellent data collection work occurring across the country. However, these efforts are largely uncoordinated and do not tell the full story of the health of Canadians or adequately assess the performance of the health care system. Indeed, despite an abundance of metrics and measurement, in many cases, data is not necessarily usable by the public or decision-makers and, unfortunately, is not necessarily comparable between jurisdictions. The CMA recommends that the federal government recognize the significance of nationally comparable metrics on health and the health care system and national public reporting in demonstrating accountability (i.e. better health, better care, and better value). In achieving these objectives, the CMA recommends that the federal government mandate an appropriate national organization, such as the Health Council of Canada, to undertake a consultative process with the aim of identifying pan-Canadian metrics and measurement that will link health expenditures and comparable health outcomes. 2. Coordinate the development of pan-Canadian Clinical Practice Guidelines As the federal government prepares to engage with the provinces and territories to further map out improvements to Canada's health system, the CMA strongly encourages consideration be given to the federal role in coordinating the development of pan-Canadian clinical practice guidelines (CPGs). Such a role would build upon the commitment made by the provinces and territories under the auspices of the Council of the Federation to collaborate on the development of three to five CPGs over the coming year. CPGs are systematically developed, evidence- or consensus-based statements to assist health care providers in making decisions about the most appropriate health care to be provided in specific clinical circumstances. There is compelling evidence in the literature, supported by the experience of other countries, that well-designed and disseminated CPGs can enhance the clinical behaviour of providers and provide a positive impact on patient outcomes. The principle argument in support of CPGs is their ability to enhance quality of care and patient outcomes. In addition, CPGs have been found to: * Provide publicly accessible descriptions of appropriate care by which to gauge health care performance; * Help to reduce inappropriate variations in care across diverse geographical and clinical settings; * Offer the potential of empowering patients as to appropriate care expectations; and, * Contribute to public policy goals, such as cost containment, through encouraging more appropriate provider use of resources. However, in the absence of a pan-Canadian approach, CPGs across Canada are of uneven quality and even excellent guidelines may not be effectively disseminated or implemented. In contrast to Canada, peer-nations such as the United Kingdom, the United States and Australia have committed at a national level to support the development and dissemination of CPGs. In November 2011, the CMA, together with leading national medical and health sector stakeholders, convened a Canadian Clinical Practice Guidelines Summit, attended by representatives of the federal and most provincial and territorial governments, to explore key components of a pan-Canadian strategy on CPGs. Emerging from this summit was a clear consensus that it was the federal role to provide the infrastructure support necessary to facilitate the development and dissemination of high-quality CPGs, customizable to the needs of all jurisdictions in Canada. Guideline development and implementation is a complex, lengthy and resource-intensive process. In the absence of federal coordination in Canada, guidelines are produced by disparate, disease-specific groups, often funded by the pharmaceutical industry. This creates an obvious potential for conflict of interest where the guideline development process is far from transparent. Many guidelines are published without disclosure on conflict of interest or methodology applied. Concern over the quality of guidelines presents one the most persistent barriers to adoption by physicians of the recommended practice. The resulting underutilization of CPGs in Canada is widely documented. Clearly, the development and dissemination of pan-Canadian CGPs present a unique and significant opportunity for improvement in Canada's health care system. The CMA recommends that as part of further discussions with the provinces and territories, the federal government commit to working with the provinces, territories and health sector stakeholders towards the development of a pan-Canadian clinical practice guideline initiative. In particular, the CMA recommends that the federal government commit support for the infrastructure necessary for the development, maintenance, and active dissemination of relevant, high-quality clinical practice guidelines. 3. Address the limitations proposed under the pension reform framework As previously indicated in the August 2011 submission to Finance Canada by the Retirement Income Improvement Coalition (RIIC), the CMA supports the federal government's proposal to expand access to pensions, specifically by developing pooled registered retirement plans (PRPPs). While we are currently assessing the package of proposed Income Tax Act amendments and will provide more detailed comments as part of the legislative process, the CMA is concerned that the framework, as proposed, limits the potential for PRPPs to expand physician access to, and investment in, pensions. Based on preliminary analysis, it is our understanding that the core benefit of the PRPP framework is in providing small businesses access to low-cost pension plans, thereby providing a vehicle to encourage employers to establish, and contribute to, pensions for their employees. Given that a significant proportion of physicians are self-employed, they would not benefit from employer contributions to a PRPP. Further, as proposed, the contribution limit to PRPPs would be calculated as an element of the current RRSP and pension contribution limit. Finally, further clarification is required on the type of organization that may qualify as a PRPP administrator. Well-governed organizations that represent a particular membership should be able to sponsor and administer RPPs and PRPPs for their own members, including self-employed members. While the CMA supports the proposed PRPP framework in principle, the limitations to PRPPs should be addressed to ensure that they provide value to self-employed Canadians, including physicians. The CMA recommends that Finance Canada consider amendments to the proposed Income Tax Act amendments to address limitations to PRPPs, specifically: (1) expanding the PRPP framework to include defined benefit and targeted benefit pension plans; (2) increasing the retirement savings capacity of self-employed individuals by either raising the RRSP limit or providing a distinct limit for PRPPs; and, (3) ensuring the PRPP framework expands the eligibility of administrators beyond financial institutions. Conclusion The comments and recommendations provided herein represent the CMA's priority recommendations for targeted federal funding towards the achievement of efficiency improvements in Canada's health sector. It is the CMA's position that these measures will contribute to a healthy, more productive and innovative economy by contributing to better care, better health and better value in the health care system. Once again, the CMA appreciates the opportunity to provide these additional comments and recommendations. i 2006 Census data ii http://www.cma.ca/multimedia/CMA/Content_Images/Inside_cma/Media_Release/2011/Dec-Poll_en.pdf
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A More Robust Economy through a Healthier Population: Canadian Medical Association 2012-2013 pre-budget submission

https://policybase.cma.ca/en/permalink/policy10635
Date
2012-11-01
Topics
Health systems, system funding and performance
  1 document  
Policy Type
Parliamentary submission
Date
2012-11-01
Topics
Health systems, system funding and performance
Text
The Canadian Medical Association (CMA) submission to the House of Commons Standing Committee on Finance discusses the important role of the federal government in ensuring Canada's health care system is cost-effective, accountable and accessible across the country in order to support the country's economic advantage. Investing in health and health care is required to generate wealth. As in other leading industrialized countries, the federal government needs to play a stewardship role in the effective allocation of health-related resources to foster a productive workforce and a strong economy. The purpose of this brief is to provide decision-makers with information on areas in which the federal government can contribute to improving the health of Canadians and the health care system - an issue Canadians consistently rank as their top concern. The CMA recommends that: Recommendation # 1 The federal government endorse the Principles to Guide Health Care Transformation, developed by the CMA together with the Canadian Nurses Association and since endorsed by over 120 national organizations. Recommendation #2 The federal government engage the provinces and territories in a consultative process to identify pan-Canadian metrics and measurement that link health expenditures to nationally comparable health outcomes. The purpose of which is to demonstrate accountability to Canadians. Recommendation # 3 The federal government recognize the implications of the social determinants of health on the demands on the health care system. Recommendation # 4 The federal government require that the federal cabinet's decision-making process include a Health Impact Assessment. Recommendation # 5 The federal government, in consultation with provincial and territorial governments and other stakeholders, establish a program of comprehensive prescription drug coverage to be administered through provincial/territorial and private prescription drug plans to ensure that all Canadians have access to medically necessary drugs. Recommendation # 6 The federal government, together with the provinces and territories, develop and implement a pan-Canadian strategy for continuing care, which would integrate home care and facility-based long-term, respite and palliative care services fully within health care systems. Recommendation # 7 A targeted health infrastructure fund be established as part of the federal government's long-term plan for public infrastructure. The purpose of this fund would be to address infrastructure shortages in the health sector that prevent the optimization of health human resources and exacerbate wait times. Recommendation # 8 The federal government expand the relief programs for informal caregivers to provide guaranteed access to respite services for people dealing with emergency situations, as well as increase the Family Caregiver Tax Credit to better reflect the annual cost of family caregivers' time at market rates. Recommendation # 9 The federal government establish programs to encourage Canadians to save for their long-term care needs by pre-funding long-term care through for example, private insurance, tax-deferred and tax-prepaid savings approaches, and contribution-based social insurance, such as an RESP-type savings vehicle. Recommendation # 10 The federal government develop and implement a national dementia strategy. Such a strategy will contribute to addressing the alternative level of care crisis impacting the efficiency of the overall health care system. Introduction Despite significant investments in health care and improvements in medical treatment and technologies, health outcomes in Canada are not improving. The incidence of chronic disease, such as diabetes and the corresponding risk factors, among them obesity, continues to rise. These negative outcomes can have a significant impact on the prosperity of the country as health is necessary for individuals to lead a prosperous and autonomous life. While the federal government's investment in the sector has continually increased, it is generally agreed that, in terms of its health care system, Canada is no longer a strong performer compared to similar nations. As in other leading industrialized countries, the Government of Canada needs to play a stewardship role in the effective allocation of health-related resources, which in turn will foster a productive workforce and a strong economy. The federal government also has a role in addressing the social and economic factors that affect the health of Canadians. These factors are often referred to as the social determinants of health and were a central theme at the CMA's annual General Council meeting this year. This brief provides tangible recommendations on how the federal government can contribute to the transformation of Canada's health care system and to improving the health of Canadians. 1. The Role of the Federal Government Issue: The federal government has the levers to foster a healthy, productive workforce. This section discusses opportunities for the federal government to address the challenges facing Canada's overall health care system. Even though the fiscal arrangement for the future Canada Health Transfers has been established, the federal government has other significant responsibilities with respect to the health of Canadians and the overall health care system. This view is shared by a majority of Canadians. Recent polling found that: 75 per cent of Canadians believe health care should be the federal government's top priority; 87 per cent believe that the federal government should pay more attention to health care, and 85 per cent believe the federal government should play a leading role in protecting and strengthening the health care system. An important role to be fulfilled by the federal government is to ensure Canada's health care system is cost-effective, accountable and accessible across the country. Health expenditures account for an increasing proportion of provincial and territorial budgets, and many warn of increasing future demands on health care. In his Economic and Fiscal Outlook Report of May 17, 2012, the Parliamentary Budget Officer stated that "the provincial-territorial long-term fiscal situation has deteriorated." Measures that transfer costs from one level of government to another do not improve Canada's overall fiscal situation. Despite the importance of the health care sector to Canada's economy and quality of life, it is generally agreed that in health care, Canada is no longer a strong performer relative to similar nations. For instance, OECD Health Data 2012 ranks Canada seventh highest of 34 member states in per capita health care spending,1 while Canada's health care system continues to rank below most of our comparator countries in terms of performance. In addition, recent projections indicate that the overall spending on health as a percentage of GDP will continue to increase.2 However, the health sector has an important role in sustaining Canada's economic recovery and enhancing economic growth. In fact, the health sector supports a healthy and productive workforce by providing over one million high-value jobs, representing about 10 per cent of Canada's labour force. The contribution of Canada's health care system to the international competitiveness of our economy has been repeatedly demonstrated in KPMG's Competitive Alternatives report.3 Taken together, these issues highlight significant potential for the health sector, through efficiency improvements gained by health care transformation, to support long-term economic recovery and growth in Canada. Finally, while the provinces and territories have initiated positive steps to collaborate on the sharing of best practices in health care, federal leadership could contribute to these efforts by addressing the overall performance of the health care system in Canada. The federal government should collaborate with the provinces and territories to introduce a pan-Canadian framework for reporting to Canadians on performance, outcomes and expenditures, including on whether national standards of quality and timeliness have been met. The federal government would also fall under this framework, as it is responsible for the delivery of health care services to a large population. In fact, in health care delivery, it is the fifth-largest jurisdiction in Canada. The CMA recommends that: * The federal government engage the provinces and territories in a consultative process to identify pan-Canadian metrics and measurement that link health expenditures to nationally comparable health outcomes. The purpose of which is to demonstrate accountability to Canadians. 2. The need for a Health Impact Assessment (HIA) Issue: All federal government decisions need to be viewed through the lens of their possible impact on health, health care and Canada's overall health objectives. While a strong health care system is vital, improvements to it alone will not improve health outcomes or reduce the disparities that currently exist in disease burden and health risks. Research suggests that 50 per cent of population health is determined by our social and economic environment.4 What is needed is a process to address the social determinants that can be barriers or enablers to health and to ensure healthy public policy for all Canadians. A Health Impact Assessment (HIA) is a systematic process for making evidence-based judgments on the health impacts of any given policy and to identify and recommend strategies to protect and promote health. The HIA is used in several countries, including Australia, New Zealand, Norway, the Netherlands and the United States. The HIA can ensure that all government departments are able to consider the health impacts of their programs and policies by anticipating possible unintended health consequences or impacts on health care spending. The implementation of an evidence-based HIA is one way in which the federal government can play a leadership role in health care and strengthen accountability to Canadians. The CMA recommends that: * The federal government recognize the implications of the social determinants of health on the demands on the health care system; and that, * The federal government require that the federal cabinet's decision-making process include a Health Impact Assessment to ensure that the health of Canadians is a key factor in every policy decision it makes and unintended consequences are avoided. 3. Contribute to Health Care Transformation (HCT) Issue: A transformed health care system will be more effective and comprehensive and will strengthen Canada's competitive advantage. In 2010, as part of its Health Care Transformation (HCT) initiative, the CMA broadly consulted Canadians across the country on their views on health care. Canadians said they do not believe they are getting good value from their health care system, a feeling borne out by studies comparing Canada's health care system to those in leading countries in Europe. Following this consultation, in partnership with the Canadian Nurses Association, the CMA developed Principles to Guide Health Care Transformation in Canada to guide the transformation of Canada's health care system. To date, over 120 national medical, health and organizations have endorsed these principles. During the HCT consultation, we also heard that Canadians are concerned about inequities in access to care beyond the basic medicare basket, particularly in the area of prescription drugs. In fact, reports in 2002 by the Senate Standing Committee on Social Affairs, Science and Technology (Kirby) and the Commission on the Future of Health Care in Canada (Romanow) forged a consensus on the need for "catastrophic" pharmaceutical coverage, which may be defined as out-of-pocket prescription drug expenditures that exceed a certain threshold of household income. Under the National Pharmaceuticals Strategy (NPS), cost projections of catastrophic pharmaceutical coverage were explored and seemed to favour the use of a variable percentage threshold linked to income. However, there has been no public reporting on progress since 2006.5 Moreover, there is also an issue of expensive drugs that may be used for common diseases. Finally, as highlighted by recent experiences, Canada does not have a monitoring and early notification system for drug shortages nor a systematic mechanism to prevent interruptions in the provision of medically necessary medications. Thus far, the term "catastrophic" has been used by First Ministers and the NPS to describe their vision of national pharmaceutical coverage. As defined by the World Health Organization, catastrophic expenditure reflects a level of out-of-pocket health expenditures so high that households have to cut down on necessities such as food and clothing and items related to children's education.6 In the CMA's view, this does not go far enough and what Canada must strive for is "comprehensive" coverage that covers the whole population and effectively pools risk across individuals, public and private plans, and jurisdictions. There are several indicators that show health care services and coverage are not keeping up with Canadians' needs and vary depending on where one lives in Canada. Wide variation in access to pharmaceutical treatments remains the most glaring example of inequity in our health care system - all Canadians should have a basic level of drug coverage. Further, long wait times for medical care can be found in smaller provinces and drug coverage and services for seniors are particularly poor in Atlantic Canada. The fact remains that one in 10 Canadians cannot afford the medications they are prescribed.7 For this reason, ensuring access by all Canadians to needed prescription drugs is an essential element in the CMA's proposed framework for Health Care Transformation. By working to establish comprehensive prescription coverage, the federal government would not only uphold its commitment to ensure the best health for Canadians, but also contribute to the transformation of our country's most cherished social program. The CMA recommends that: * The federal government endorse the Principles to Guide Health Care Transformation, developed by the CMA together with the Canadian Nurses Association and since endorsed by over 120 organizations. * The federal government, in consultation with provincial, territorial and other stakeholders, establish a program of comprehensive prescription drug coverage to be administered through provincial/territorial and private prescription drug plans to ensure that all Canadians have access to medically necessary drugs. 4. Meeting the health and health care needs of Canadians Issue: Measures should be taken to prepare for the looming demographic change and address the needs of Canada's aging population Steps need to be taken to ensure that Canada is prepared to handle the growing long-term care needs of its citizens. These should include funding for much-needed infrastructure and additional support for both health care providers and informal caregivers. In its most recent report, the Wait Time Alliance noted a link between the rise in diagnosis of dementia and the rise in alternate-levels-of-care (ALC) patient stays in hospitals. These are patients who are in hospital while they await an alternative level of care in a more appropriate setting, often a long-term facility. The shortage of long-term care facilities is a major impediment to achieving efficiency in the health care system and yet another issue for which the federal government is well positioned to collaborate and coordinate on a pan-Canadian strategy. Under its next long-term infrastructure program, the federal government should include a targeted health sector infrastructure fund for long-term care facilities. This should be part of a pan-Canadian strategy to redirect care from hospitals to homes, communities and long-term care facilities, where patients can receive more appropriate care at a lower cost. We can expect that many more facilities will be required to meet the long-term care needs of Canadians. The most recent census data shows that over the last decade there has been a 38 per cent increase in the number of seniors living in special care facilities.8 Based on residency rates of the present population, Canada will need over 800,000 long-term care beds by 2047. Considering the average size of existing long-term care facilities it is estimated that meeting this future demand will require construction of almost 6,000 additional long-term care facilities over the next 35 years, almost 170 a year.9 Another related issue that has the potential to affect productivity is the burden of providing care to family members. Without adequate long-term care resources and support for home care, Canada's labour force may experience a productivity drag as a result of increased leave and absenteeism to care for elderly relatives. The 2011 federal budget took a first step at providing tax relief for informal caregivers with the introduction of the Family Caregiver Tax Credit. However, this credit of up to $300 a year by no means provides sufficient support for informal caregivers. A 2004 Canadian study estimated that the annual cost of a caregiver's time at market rates for moderately to severely disabled home care clients ranged from $5,221 to $13,374, depending on the community in which they reside.10 Expanding the Family Caregiver Tax Credit would help, but the CMA believes that additional support for informal caregivers will also be needed in the coming years. Also, according to a 2012 World Health Organization (WHO) report on dementia,11 Canada is one of the few members of the G7 without a national strategy on dementia. There is a lack of awareness and understanding of dementia, which results in stigmatization and barriers to diagnosis and care, and has an impact on caregivers, families and societies - physically, psychologically and economically. Canada's aging population, and the projected rise in Alzheimer's disease and related dementias, pose an emerging health crisis that require federal leadership. The CMA recommends that: * The federal government, in partnership with the provinces and territories, develop and implement an integrated, pan-Canadian strategy for continuing care, which would integrate home care and facility-based long-term, respite and palliative care services fully within health care systems. Such a strategy would help prepare for the looming demographic change and the address the needs of Canada's aging population. * A targeted health infrastructure fund be established as part of the federal government's next long-term plan for public infrastructure. The purpose of this fund would be to support communities across Canada in addressing infrastructure shortages in the health sector that prevent the optimization of health human resources and exacerbate wait times. * The federal government expand the relief programs for informal caregivers to provide guaranteed access to respite services for people dealing with emergency situations, as well as increase the Family Caregiver Tax Credit to better reflect the annual cost of family caregivers' time at market rates. * The federal government establish programs to encourage Canadians to save for their long-term care needs by pre-funding long-term care through for example, private insurance, tax-deferred and tax-prepaid savings approaches, and contribution-based social insurance, such as an RESP-type savings vehicle. * The federal government develop and implement a national dementia strategy. Such a strategy will contribute to addressing the alternative level of care crisis impacting the efficiency of the overall health care system. 1 OECD Health Data 2012 - http://www.oecd.org/health/healthgrowthinhealthspendinggrindstoahalt.htm 2 CD Howe Commentary Chronic healthcare spending disease: a macro diagnosis and prognosis and Livio Di Matteo and ROSANNA DI MATTEO, The Fiscal Sustainability of Canadian Publicly Funded Healthcare Systems and the Policy Response to the Fiscal Gap CHSRF series of reports on financing models: Paper 5, January 2012. http://www.chsrf.ca/Libraries/Commissioned_Research_Reports/Dimatteo-Fiscal-E.sflb.ashx 3 KPMG. Competitive Alternatives: KPMG's Guide to International Business Location Costs. 2012 edition 4 The Standing Senate Committee on Social Affairs, Science and Technology Final Report of Senate Subcommittee on Population Health. June 2009. 5 Federal/Provincial/Territorial Ministerial Task Force on the National Pharmaceutical Strategy Progress Report. June 2006. http://www.hc-sc.gc.ca/hcs-sss/alt_formats/hpb-dgps/pdf/pubs/2006-nps-snpp/2006-nps-snpp-eng.pdf. Accessed 08-05-08. 6 Xu K, Evans D, Carrin G, Aguillar-Riviera A. Designing health financing systems to reduce catastrophic health expenditure. Geneva: World Health Organization, 2005. 7 Law MR, Cheng L, Dhalla IA et al. The effect of cost on adherence to prescription medications in Canada. CMAJ February 21, 2012 vol. 184 no. 3 8 Statistics Canada. September 19, 2012. Living arrangements of seniors: Families, households and marital status Structural type of dwelling and collectives, 2011 Census of Population. 9 According to the Canadian Healthcare Association (New Directions for Facility-Based Long-Term care), in 2007 there were 2,577 long-term care facilities in Canada and 217,969 beds. We used the average number of beds per facility to calculate the number of facilities required to meet expected future demand. 10 Chappell, N.L., B.H. Dlitt, M.J. Hollander, J.A. Miller and C. McWilliam. 2004. "Comparative Costs of Home Care and Residential Care." The Gerontologist 44(3): 389-400 11 http://www.who.int/mental_health/publications/dementia_report_2012/en/
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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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