A Prescription For MEDICARE

Ten ways to heal the health-care system

MARY JANIGAN July 31 1995

A Prescription For MEDICARE

Ten ways to heal the health-care system

MARY JANIGAN July 31 1995

A Prescription For MEDICARE

Ten ways to heal the health-care system



Perhaps medicare has become such a proud and enduring symbol of our heritage because so much else has slipped away. Governments have closed military bases, pared cultural grants, taxed back old age pensions and dismantled much of that fabled national dream, the railway. But for almost 40 years, as their support for other touchstones has faltered, Ottawa and the provinces have ensured that medical and hospital care remain free. It is a principle engraved on the Canadian soul: the sick will not face financial ruin. Americans may wave their flags; Canadians brandish their healthcare cards, comforted and inspired by their promise of mutual support. As Queen’s University economist Tom Courchene notes, health care has become the symbolic railway of the 21st century, replacing rusting steel with resilient plastic. “Medicare means pooling risk and sharing,” he says. “And that is our whole history.”

Weighted with symbolism, charged with matters of life and death, it is no wonder that the health of medicare itself has become so worrisome to Canadians. The list of its ailments certainly sounds ominous. Over the next two years, Ottawa is cutting about one-third from the $16.8 billion in cash that it now transfers annually to the provinces for health, postsecondary education and welfare. The federal government has relied on that large cash contribution to discourage provincial user fees and extra billing: since 1984, when it passed the Canada Health Act, it has threatened to withhold one dollar for every dollar that patients are required to pay for “medically necessary” services. But as Ottawa’s financial contribution wanes, its power is eroding. As Courchene tartly observes, Ottawa has broken the golden rule of federal-provincial relations: “If you want to make the rules, you have to supply the gold.”

In open defiance of Ottawa’s wishes, cash-strapped provinces are grasping at solutions that would once have been politically unthinkable. Alberta has a dozen private clinics that offer eye operations or

scans of soft body tissues, such as brains, using a technique known as magnetic resonance imaging; patients pay varying portions of the total bill that would be completely covered if the procedures had been performed in public institutions. Although federal Health Minister Diane Marleau has vowed to cut Ottawa’s payments if those private charges are not stopped by Oct. 15, the province has refused to back down. Alberta’s new deputy health minister, Jane Fulton, counters that the clinics simply respond to consumer demand (page 18). A mere decade ago, Ottawa would likely have posed as the champion of medicare in a dramatic tug of wills. Now, although Marleau may impose the penalty, she is more likely to back down in the end—because Ottawa and the provinces have agreed to define together what constitutes a “medically necessary” service. The list is expected to exclude many services that the clinics provide; Canadians may soon face more charges for care. Says University of

Toronto health policy professor Raisa Deber: “Unfortunately, it is usually easier to shift costs than to control them.”

Meanwhile, at the bottom of the fiscal chain, health providers and patients are feeling the pinch. Almost every province has slapped ceilings on its overall budget for physicians. Ontario, for example, has set aside $3.8 billion for its doctors in 1995-1996 (down from $3.9 billion in 1992-1993). If the tab exceeds that amount, each doctor will lose a portion of each fee until the excess is recovered. Hospitals, in

turn, are setting strict limits on the number of individual proce-

r dures such as cataract operations that they will perform each year. Anxious patients often wait months for surgery, unaware of their choices or their chances. As Dr. Bruno L’Heureux, president of the Canadian Medical Association, says: “We will be asked to do more and more with less resources with an aging population, and with technology and medication more expensive than they used to be.”

The sheer size of the challenge is mind-boggling. What began as a federal-provincial program to share hospital costs in 1957 has sprawled into a multibillion-dollar business that covers medical treatment, drugs for the elderly and welfare recipients, institutions such as long-term care facilities, and health-care workers from midwives to chiropractors. Canada spent $72 billion on health care in 1993—10.1 per cent of its gross domestic product. (In 1980, it was 7.3 per cent of GDP.) Governments picked up about 72 per cent of that cost; individuals or insurance firms paid the rest. Only one nation among the 25-member Organization for Economic Co-operation and Development spent a greater share of its wealth on health care: the United States, at 13 per cent—although the quality of U.S. care, based on infant mortality and life expectancy rates, lags considerably behind Canada.

With so much money at stake, it is not surprising that governments are haggling, providers are distressed and patients are concerned. But the prognosis is not as bad as the pessimists fear. Medicare may be ailing. But it is nowhere near death’s door. Most health-care economists believe that, even taking the current round

of spending cuts into account, there is more than enough money to meet current needs. Japan, for example, spent only 6.6 per cent of GDP on health care in 1991—but the Japanese live longer than Canadians (an average of 79 years, compared with 78 years in Canada) and their infant mortality rate is lower. Many experts even maintain that medicare can flourish well into the next century, despite the increasing number of elderly and dwindling financial resources. As Ken Fyke, CEO of the Greater Victoria Hospital Society, an organization that comprises three local hospitals, bluntly told Maclean’s: “There is enough money in the system. What it needs is strong management and strong leadership to reform it.”

Like a fantastical genie, reform can assume many shapes. From Newfoundland to British Columbia, provinces are busily experimenting with various approaches. Some are controversial, such as Alberta’s flirtation with private care. Some are plain common sense, such as an increased determination to keep elderly people in their homes. There is, of course, no magic “right” solution. But among the intriguing, often contradictory, approaches, here is a list of 10 ways to safeguard medicare’s health:

O Ensure that government remains the principal payer

It is fashionable and often practical to talk about privatizing many services that governments provide. So it is perhaps inevitable that the notion has spread to medicare. British Columbia, for one, allows private clinics to perform soft-tissue scans—although in late June the province introduced legislation to prevent public money from flowing to those facilities. Alberta and British Columbia reason that the health-care system is short of funds—so patients who have the money should be able to use competing facilities.

The problem, however, is that governments do not provide health care: they buy it from providers such as doctors who bargain as a


A sampling of health-care cuts since 1992:


One hospital and 900 acute-care beds


Maximum dispensing fee for prescription-drug program increased from $7.15 to $7.50.


Four hospitals scheduled to close by 1997; eight hospitals to be converted to community health centres. Out-of-country benefits reduced; healthcare premiums increased from $30 to $36 per month for a single person.


Fifty-two hospitals converted to health centres.

Removed from coverage: children’s dental program; sterilization reversals; eye exams for adults. Chiropractic services and out-of-country benefits reduced.


Sixty-five hospital beds closed. Reduced services: eye examinations; out-of-country benefits; number of insured drugs cut. Children’s dental program and sterilization reversals eliminated.


One hospital closed; 14 others merged; almost 4,000 beds closed.

Removed from coverage: tattoo

removals; electrolysis for removal of facial hair; newborn circumcisions. Out-of-country emergency hospital coverage slashed from $400 to $100 a day.


Seven hospitals set to close, six others to be converted into long-term care facilities. Total of 2,500 bed closures in the next three years. Removed from coverage: eye exams for persons 41 through 64; children’s dental program.

NEW BRUNSWICK 250 hospital beds closed.

Removed from coverage: newborn circumcision; stomach stapling; sterilization reversals.


One hospital closed; another shut its acutecare beds; three hospitals converted to community health centres. Removed from coverage: eye exams for adults.

PRINCE EDWARD ISLAND One hospital to be converted to community health centre.

NEWFOUNDLAND Three hospitals set to close.

Removed from coverage: drivers’ medical exams; hypnotherapy; newborn circumcision; eye exams.

unit. And those providers, in turn, have a captive market. Consider the system: the usual market rules do not apply. Most medical service is available to everyone who needs it. The user cannot be priced out of the market. The user often does not even know if he or she really needs the service: that is the job of the provider. In such circumstances, when it is difficult to curb the patient’s demand for service, most health-care experts say that it is more useful to control the suppliers. And, they say, that means governments should preserve their hold on the purse strings as much as possible—because only a single payer has the power to counterbalance the demands of a powerful provider such as a provincial doctors’ association. A single buyer is also in a better position to encourage internal competition among such suppliers as drug companies.

If governments relinquish their control, health-care experts warn that costs could increase dramatically—as they have in the mainly private American system. That would penalize users—and it could divert resources away from other goals, such as education. “Most of the advocates of privatization are saying that we have got to get more money into the system,” says University of British Columbia economist Robert Evans. “But that is essentially saying, ‘Abandon the target of cost control, and let’s keep this system expanding.’ If you want to try to manage your system more tightly so as to live within your constrained means, then you have to stay with a single payer.”

Similarly, when the goal is to restrain costs, user fees are often counterproductive—as experience in Saskatchewan has illustrated. When that province imposed a $1.50 fee for each visit to a doctor’s office between 1968 and 1971, there was an 18-per-cent decline in visits by low-income families—three times the average reduction. The annual increases in gross payments for medical services, however, remained roughly similar to those in the other nine provinces. The evidence suggests that doctors simply ordered more services for their middle-income patients to compensate for their loss in income. It appears, however, that user fees work when the goal is to change specific patterns of wasteful behavior. In the early 1990s, when Quebec threatened to clamp a $5 fee on unnecessary emergency ward visits, the use of cheaper “no appointment” community clinics jumped dramatically.

O Change the way doctors are paid

Two-thirds of Canada’s 55,000 physicians are paid mainly through fees for each service that they perform. But healthcare experts argue that there are too many doctors—and they order too many services. The problem began when the 1964 Royal Commission on Health Services estimated that the population would hit 35 million in 1991—instead of the actual figure of 28 million. As a result, it called for the creation of five new medical schools and the expansion of several existing

schools, predicting that there would be one doctor for every 857 people in 1991. Instead, there was one doctor for every 536 people. And those doctors were very, very busy. During the 1980s, the number of patients grew by almost 20 per cent—but the number of medical services expanded by more than 50 per cent. There was also a shift from cheaper to more expensive services: Ontario doctors, for example, submitted more bills for intermediate, rather than minor, consultations, which added about $8 to the $16 cost of a visit. (Such trends have levelled off in the 1990s.)

The provinces are belatedly tackling those problems. In the fall of 1993, in a concerted effort, they reduced the number of places in medical schools by 10 per cent. They are also experimenting with new ways to pay doctors. The goal is not to penalize self-employed family physicians—who earned an average net income of $129,000 in 1992. Instead, the provinces want to correct an often perverse system that awards more money to doctors who spin patients through their offices, inflating their billings by performing multiple services instead of providing nurturing care. Some provinces, including Ontario and Quebec, have put the doctors in their community health clinics on salary. Ontario pays a set annual fee to a handful of group practices for each of their patients—regardless of the number of services. “I

don’t think one size ever fits all,” says the University of Toronto’s Deber. “But we do not want the clinical judgment related to the pay mechanism.”

O Improve the efficiency of hospitals

In 1993, Ontario’s Stratford General Hospital confronted a wretched fiscal fact: it did not have enough money to keep open all of its 110 adult surgery and medical beds. In desperation, the hospital’s physicians devised a novel system: they appointed nine fellow doctors to serve as “Dr. No” and “Dr. Go.” No physician could admit a patient to the hospital without the approval of that day’s Dr. No. Two other physicians functioned, on a rotating basis, as Dr. Go, determining when patients should be sent home. Despite their initial skepticism, the system worked because it enforced stricter rules on admission and departure. No surgery was cancelled, no one slept in the emergency department and no one was shuffled to another hospital. When the crisis passed, the system stayed. The number of acute-care beds has been cut in half. As chief of staff Dr. Art Van Walraven told Maclean’s: ‘Through such continued efficiency in bed use, we have been able to preserve all programs and services.”

Health-care experts maintain that hospitals can live with diminished budgets. New techniques such as laparoscopic surgery allow doctors to perform operations such as gall bladder removal through a small tube inserted with a tiny incision. Even five years ago, such surgery would have entailed a lengthy hospital stay: now patients often leave within several days. Such procedures, coupled with Stratford’s strict criteria, can

ensure continued quality care. It appears, however, that the greatest savings can be found when individual hospital boards are replaced with regional boards, especially if the new members do not feel deep attachment to individual institutions. In late June, Newfoundland announced the closure of three hospitals in St. John’s by December, 1998, with services to be consolidated in the city’s remaining five facilities. Health Minister Lloyd Matthews acknowledged that the province’s 31 individual boards had fought hard to preserve beloved institutions—before the government amalgamated them into eight regional boards. “But what we are doing is for the right reasons: so that health care will always be there for people,” he told Maclean’s.

O Change who does what in health care

First, say most health experts, GPs should act as “gatekeepers”: that is, patients should not be allowed to consult a specialist unless their family doctor refers them. (Patients can now consult specialists directly.) That approach would ensure better use of resources. Second, many experts believe that other professionals such as nurse practitioners could competently perform many tasks such as immunization and routine checkups that doctors now handle. A 1980 study by the California-based Kaiser-Permanente Health Services Research Centre, for example, concluded that nurse practitioners could do 63 per cent of doctors’ work—at 38 per cent of the cost. The difficulty is that Canada has a lot of family practitioners—28,719 in 1994, one for every 1,024 people—compared with one for every 1,648 in 1970. Warns the University of

British Columbia’s Evans: ‘The problem is: we have got all these GPs around. What are you going to do with the guys that are already here?”

0 Ensure that all groups work together

In 1984, the British Columbia government created the, Greater Victoria Hospital Society because the city’s medical care was in chaos. Emergency wards were jammed. Patients who belonged in nursing homes were occupying 20 per cent of the acute-care beds. Doctors were cancelling surgery for 500 patients each year because no beds were available. Fyke, the new society’s CEO, set up strict criteria for admission and discharge. As a result, he was able to close acute-care beds—and to channel the savings into community-care organizations. Today, Fyke says, only five per cent of the beds are occupied by patients who should be in other facilities. The society has actually cut the number of beds per thousand residents to 15 per cent below the provincial average—even though Victoria has a large proportion of elderly residents. (Almost one-fifth are 65 or over—compared with the national average of 11.6 per cent.) Surgery is never cancelled because there are no beds. As Fyke told Maclean’s: “It’s very simple: if patients can’t get care in the community, they end up in your emergency department and they end up in a bed in your hospital.”

Across the nation, provinces are experimenting with similar approaches to ensure that all parts of the health-care system work together. Experts point to Ontario, which is poised to start up an experimental, nonprofit Comprehensive Health Organization in the region of North Algoma. If the new Conservative government

decides to proceed with the concept, the new organization will receive a single annual payment based on the number of patients that it enrols. (Patients will pay no fees.) In turn, the CHO will arrange primary care, community care and hospital services. Such approaches, say the experts, probably make better use of scarce resources, closing excess hospital capacity and shifting money to community care.

0 Make sure that medical procedures actually work

Most patients would be appalled to discover how little research exists I

on what procedures do the most good for the least cost. Health-care ll experts refer to such work as “outcomes” research—and they single £ out Toronto’s Institute for Clinical Evaluative Sciences for excellence. || In less than three years, the institute has detected massive variations in the rate at which surgery such as knee replacement is performed in various areas. And it has singled out hospitals that are more likely — to perform such invasive, traumatic procedures as caesarean sections, appendectomies and radical mastectomies for breast cancer.

The institute even looks at the way that hospitals handle routine cases, turning traditional approaches on their heads. A medical team at Ottawa Civic Hospital recently examined the customary emergency ward practice of sending 85 per cent of patients with ankle injuries for X-rays. To the astonishment of their fellow personnel, the team devised a simple clinical test to detect fractures by probing for bone tenderness. When the guidelines were used on a trial basis at eight hospitals, there was a 26-per-cent decline in ankle X-rays—and follow-up conÉ tacts indicated that no fractures went undetected. Since Ontario paid ■ $6.3 million for ankle X-rays in 1992-1993, the savings could be sub-

stantial. The institute even publishes a bulletin, summarizing and evaluating worldwide medical research. “Physicians are absolutely starved for simple, cogent information,” says institute CEO David Naylor.

© Keep elderly people at home as long as possible

With Canada’s population aging—15.9 per cent will be 65 and over in 2016—the demand for care is rising. That increase could be expensive. People over 75 already occupy three-quarters of the beds in long-term facilities; those facilities now account for a fifth of all health spending. Worse, in a joint Queen’s University-University of Ottawa report this year, experts predicted that there will be fewer informal sources of help for the aging generation of baby boomers. They will have fewer children to rely upon. At least one-third will be divorced or separated. And their prime asset, their homes, will be worth comparatively less because land values have levelled off.

The solution, say health-care experts, is to put more resources into community care so patients can stay at home as long as possible. That help could vary from meals-on-wheels to speech therapy and nursing visits. Most experts believe that patients receive the best care when a single one-stop-shopping agent monitors them: that is, as patients’ needs change, that agent arranges their smooth transition from one level of care to another, ensuring that they are not dumped abruptly into a hospital emergency bed. Government and business policy-makers, in turn, should ensure that care-givers receive tax breaks, time off and moral support if they help an aging senior. The Victoria Hospital Society’s Fyke notes that nearly onefifth of his city’s population is elderly. We are where Canada is going to be—and we are coping very nicely, thank you,” he says. “Every senior does not have to be put into a hospital bed.”

O Control drug costs more effectively

Pharmaceuticals, which include prescription and nonprescription drugs, are one of the fastest-growing components of the health-care tab. During the 1980s, costs grew by 15 per cent each year; from 1987 to 1991 alone, there was a 56-per-cent increase. Part of the problem is a flood of new products. But data also show that doctors are giving individual patients more prescriptions—and each prescription includes more pills.

Although all provinces are grappling with this increase, Saskatchewan has perhaps devised the most coherent approach to control costs and quality. First, it has drawn up a list of the drugs for which the province will pay its full portion of the tab. (Welfare recipients, for example, pay no more than $2 per prescription if the drug is on the list.) To control the flood of pricey new drugs, the province takes a long, hard look at their therapeutic value and their cost before approving them for coverage. After all, new drugs do not always produce better results than old ones: research indicates that older antibiotics such as amoxicillin are still as effective in the treatment of common infections as many newer, far more expensive drugs. In addition, every six months the province calls for tenders from the drug companies, bulk-buying about 80 commonly used drugs at an annual estimated saving of $900,000.

In February, the province concluded an innovative agreement with the giant pharmaceutical g firm Merck-Frosst Inc. The company produces | a drug called Prosear, which is used to treat t; enlarged prostates. Merck-Frosst has agreed to ^ refund the province’s costs if patients who are ” taking it under the prescribed conditions Ê require surgery. As Barbara Shea, executive director of the prescription drug services branch, told Maclean’s: ‘We went to the company and said, We believe that it is time to put your money where your mouth is.’ ”

OSet up more community health centres

Ideally, health centres reach out to their neighborhood, fostering disease prevention and providing high-quality primary care to often neglected populations. Saskatchewan, and then Quebec, pioneered the concept. Now, even Ontario has 52 outlets scattered around the province, offering specialized services to such groups as multicultural communities and the disabled. Each centre’s staff usually includes GPs, social workers, nurses, nutritionists and chiropodists—all paid on salary. The centres are effective because they provide cheaper, readily available care—and because they often catch illnesses such as high blood pressure before they become serious problems.

© Allow patients greater say in their care

Experts agree that patients should understand the risks and benefits of surgery. And they urge more Canadian doctors to use such services as the Foundation for Informed Medical Decision Making, a nonprofit New Hampshire corporation. Since 1989, the foundation has produced interactive programs on problems such as breast cancer treatment and lower back pain. (It even co-funded a program on angina with the Ontario health ministry.) Patients at 10 Canadian locations—including hospitals in Halifax, Vancouver and Victoria—can use video monitors and microcomputers to view information on their problem. Research by the University of Toronto’s Deber suggests that such patients feel more confident because they understand what is happening to them.

In the end, of course, there is no magic solution to Canada’s health-care woes. Provinces continue to experiment with different approaches, seeking the best ways to deliver high-quality care at an affordable price. In the short run, Canadians may endure longer waits for some surgery, fewer services for their tax dollar and more dire warnings about the crises ahead. But those problems could well recede with tougher administrators, tighter budgetary controls and better research. Most experts agree that changes can be made that will not endanger the system; they might even make it better. It simply requires determination to help the physicians and their system heal themselves. □