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Hunter Prize: How we fund hospitals holds the key to health-care reform

Commentary

The Hub’s first annual Hunter Prize for Public Policy, generously supported by the Hunter Family Foundation, focused on solving the problem of long wait times in Canada’s health-care system. A diverse group of ten finalists have been chosen from nearly 200 entries, with the finalists and winners chosen by an esteemed panel of judges, including Robert Asselin, Dr. Adam Kassam, Amanda Lang, Karen Restoule, and Trevor Tombe. The Hub is pleased to run essays from each finalist this week that lay out their plans to help solve this persistent policy problem.

Burned-out health-care workers, overcrowded hospitals, emergency room closures, and the longest wait times in recorded history. This is the portrait of Canadian health care in 2023. Last year, patients faced a median wait of 27.4 weeks for medically necessary (elective) treatment—almost three times longer than in 1993 (9.3 weeks). 

In other words, this is a crisis decades in the making.

Simply put, there is a fundamental imbalance between the demand and supply of medical services in Canada. In the absence of a pricing mechanism, this manifests in the rationed care we have come to expect in our health-care system. Of course, solutions exist—but many of the best remain contentious in our increasingly polarized world. And so, little is done beyond lip service and large cash injections.

There is, however, one common-sense reform that’s packed with potential, but without the political baggage: simply pay hospitals according to the care they provide.

At present, most hospitals in Canada are primarily funded by an opaque and outdated method of remuneration called “global budgets”. Under this arrangement, the funding total for the system, including which hospitals get those dollars, is set at the beginning of the year—primarily based on historical trends. While simple to administer, and relatively easy for governments to control, global budgets are disconnected from the true demand for services. They neither incentivize efficiency nor the treatment of complex cases. And when exhausted, hospitals are forced to put patients on ever-growing waiting lists.

Most other high-income countries know this is poor health-care policy and have therefore shifted towards a more modern approach: activity-based funding (ABF). As the name suggests, hospitals under an ABF system are paid according to the number and complexity of services they deliver. If more patients turn up at the door in need of care, hospitals receive the money needed to treat them. Alternatively, if operating rooms are sitting idle, funds can be diverted to other areas with more demand.

Basically, money follows patients to the hospitals where their care is delivered.

This common-sense approach is generally employed by 23 of 28 universal health-care systems—and for good reason. Empirical evidence consistently shows that ABF has the potential to increase the volume of services, lower wait times, and generate efficiency gains without significant impact on quality. Countries like Australia, Sweden, and the Netherlands have used some form of ABF for decades. The result? The switch to ABF was usually accompanied by an increase in the number of patients treated, shorter lengths of stays in hospital, and lower wait times. However, the increase in the volume of care provided can come at the price of an increase in overall spending—not necessarily a problem so long as the money actually goes towards providing care.

Of course, the manner in which ABF is adopted—and the proportion of funding it accounts for—can vary significantly. For example, countries like Australia and the U.K. tend to employ ABF within an overall global budget, limiting the extent to which hospital activity can truly respond to demand. By contrast, Germany and Switzerland do not generally employ such budget constraints in their ABF model. Perhaps unsurprisingly, Commonwealth Fund data examining wait times for elective surgery in 10 universal health-care countries in 2020 ranked Germany and Switzerland as top with the greatest proportion of patients receiving care within months, while Australia and the U.K. were middle of the pack. Canada, with its outdated global budgeting approach, ranked at the bottom of the list.

Some provinces have previously experimented with ABF funding in Canada. British Columbia launched a limited pilot project between 2010-2013 in select hospitals, and Ontario began employing a blended approach for a portion of hospital funding in 2012. However, the results of these experiments were unsurprisingly small in magnitude and mixed in outcomes. This is not unexpected given that hospitals were primarily still operating under defined budgets, and overall health-care spending was still budgeted by the province. Quebec, however, is soon expected to use ABF for about 25 percent of hospitals by the end of the year.

The manner in which the federal government currently provides provinces with health-care dollars via the Canada Health Transfer (CHT) furthers the disconnect between funding and activity. This is because federal health-care payments to the provinces are currently determined on a per-capita basis. As a result, the amount of federal dollars provinces receive is also not directly related to the number and complexity of cases performed, which also contributes to the lack of transparency with regard to how the transferred money is ultimately spent on services.

So what is to be done?

Simply put, Canada needs to change both the manner in which hospitals are funded as well as the manner in which federal health-care dollars are transferred.

To encourage this change, the federal government could do the following:

  1. Clarify that funding hospitals according to activity does not contravene the spirit of the CHA and allow provinces to more fully experiment with ABF;
  2. Task CIHI with determining a nationally efficient price for services by building upon the already existing CMG+ grouping system;
  3. Allocate the CHT to provinces on the basis of health-care activity;
  4. Provide a one-time fund for provincial efforts to improve electronic medical records and the centralization of intra-provincial patient referrals, while also potentially better enabling inter-provincial referrals via ABF.

Of course, design and implementation matters and the devil, as usual, is in the details. However, a well-designed ABF system that broadly mirrors the German and Swiss approach could potentially increase transparency, more directly link spending to measurable activity, and tackle wait times.

While the impact of ABF will undoubtedly be more powerful if accompanied by additional reforms, it is a relatively uncontroversial, common-sense approach, that should bring both public health-care purists and private market advocates together for the sake of Canadian patients waiting for medical care.

Sean Speer: We no longer need the CBC

Commentary

This past weekend, I was a guest on the CBC’s weekly call-in show, Cross Country Checkup, to discuss and debate the question: do we still need the CBC?

I was there in particular to make the case that the news media market has evolved over the past decades such that a public broadcaster of the size and scope of the CBC is no longer justified. Others argued in favour of preserving the CBC. And then there was a combination of callers and experts who found themselves somewhere in the middle. 

The premise behind the episode was that there are a few big developments looming over the CBC that threaten its ongoing existence. The first is that Conservative Party leader Pierre Poilievre has promised to defund the CBC and seems committed to delivering on his commitment. It remains one of the most popular applause lines in his speeches to party supporters. 

The second is growing polling evidence that CBC is not only losing its salience with the Canadian public but that even a majority of non-conservatives believe that the public broadcaster has an anti-conservative bias in its news reporting. 

The third is the broader disruption in the media industry itself including the decline of legacy news media organizations and the rise of web-based start-ups that are experimenting with new and different business models to reach their audiences and sustain their operations. 

In light of these developments, there were various arguments put forward during the episode in favour of the CBC including the need for a single public institution to connect Canadians from coast to coast, that it represents a bulwark against the rise of so-called “misinformation” and “disinformation”, and that its listeners and viewers like its content. 

Due to the number of guests and callers, I didn’t have the opportunity to address these arguments as directly and fully as I would have liked. Let me respond to them now. 

The first one speaks in part to a conservative concern that in a world of growing fragmentation and diversity, there are few sources of common citizenship and identity in Canada and the risk is a gradual drift from what Rabbi Jonathan Sacks has referred to as a “home society” to a “hotel society.” That is to say, in an absence of common stories and shared understandings of ourselves and the country, the danger is that we devolve into a loose collection of individuals merely living in the same geography. 

This is a legitimate concern that we’ve written about and discussed at The Hub. Yet the notion that the CBC is a key source of common identity belies the facts—including its relatively small audience, divided public opinion about its ongoing purpose, and growing tendency towards micro-narratives at the expense of a broader national story. 

The latter point is worth addressing more fully. Although the CBC should be lauded for concerning itself with diversity and representation within its organization and content (including news reporting), there was a sense among many of the callers that it has overcorrected for the historical underrepresentation of different stories and voices. 

This is consistent with my own experience as a listener and viewer. The network’s emphasis on identity issues can cause it to lose the forest for the trees. It has increasingly contributed to a narrow and unrepresentative conception of Canadian civic life that undermines its ability to still play a nation-building role.  

The next argument that the CBC is needed to contest misinformation and disinformation (which has been advanced by CBC’s president and CEO Catherine Tait herself) isn’t a self-evident one. It may be that these issues ultimately require some form of collective response—though the past several years have demonstrated the risks of groupthink and so-called “established narratives”—but it doesn’t necessarily follow that it requires a public broadcaster in general or the CBC’s current size and scope in particular. 

One might even argue that the right lesson is that centralization and consolidation are a threat to overcoming misinformation and disinformation. They can cause bad ideas and wrong information to calcify in the public discourse and undermine the ability of others to challenge them. The COVID-19 “lab leak” story is a powerful example. The CBC (which referred to the lab leak theory as a “conspiracy theory” and “one of the most persistent and widespread pieces of disinformation during the COVID-19 pandemic”) and other major media organizations plainly got it wrong. Smaller, less established, and typically less liberal outlets were generally the ones prepared to pursue the story and its facts. 

The key point here is that today’s fragmented and more decentralized media landscape may be messier and more complicated than the old one, but it’s not obvious that the trade-offs are inherently bad or that it necessitates an ongoing role for the CBC. 

The final case that the CBC’s content is good and well-liked by its audience members was both the most common one cited during the episode and the most counterintuitively unpersuasive. No one doubts that the CBC produces good programming or that some Canadians enjoy listening to or watching it. But that’s not a justification for the current level of public resources dedicated to the CBC or a public broadcaster in and of itself. 

There are a lot of claims on the public purse that might be popular but that doesn’t make them a good idea. Public policy needs to be rooted in something more principled than “Some people like it.” Even the show’s host, Ian Hanomansing, who deserved credit for his fairness and neutrality, seemed to miss this point. 

During the conversation, I observed that The Hub’s podcast is the eighth most popular Canadian-based one in the “culture and society” category and that six of the seven ahead of us are CBC productions. It strikes me as an odd use of scarce public dollars since it’s hard to argue that there’s a market failure in the production of podcasts. 

Yet Hanomansing’s reaction was that the relative popularity of CBC’s podcasts is somehow market proof that its content resonates with Canadians and therefore a justification for its ongoing role. The reality is that the CBC has a huge financial advantage (which is based on public subsidies rather than market competition) and is able to cross-promote its content across its well-established channels, including its internet, radio, and television assets. That of course doesn’t mean that its podcasts aren’t good or worth listening to, but it does mean that it’s not a fair measure of the CBC’s true competitiveness or a compelling case for maintaining it. 

I don’t mean to be presumptuous but I’m reasonably confident that if we received $1.24 billion in annual public funding (which suffice to say is considerably more than The Hub’s total budget), we could probably climb to higher than the eighth-most popular Canadian-based podcast in our category. We wouldn’t presume however that it was necessarily evidence of our real public support or entitled us to ongoing government resources. 

I guess the upshot is that while I was glad to participate in the conversation and think it generally speaks well of the CBC that it permitted such a discussion on its network, I came away no less convinced of the case in favour of “right-sizing” and even defunding the CBC. What that means in practice is still an open question and, as I said on the program, there will soon be a growing onus on Poilievre and the Conservatives to bring greater definition to their plans. But their basic instinct is right as a matter of principled policymaking.  

Do we still need the CBC? My answer is still no.