The Drummond Spillover
 Chris Bonnett, Editor, businesshealth | Ontario is big and likes to think big, with 39% of both Canada’s population and its Gross Domestic Product too. But at $14 billion, it also has the largest deficit relative to GDP of any province, and rapidly increasing net debt. Since 2007, Ontario’s unemployment rate has been above the national average, and personal incomes here are now just below the national average. Deficits will persist likely longer than in other provinces. But Ontario’s financial struggles are not very different from those faced by most other provinces. According to TD Economics1, only two provinces (SK and NL) are projecting a surplus in 2011-12. Of the others, only AB and QC project deficits less than 1% of their GDP, but Quebec’s debt load, at nearly 50% of GDP, is far worse than any other province. The next closest is ON (37%), and NS, PEI and NB are not far behind. Against this backdrop, the Government of Ontario established the Commission on the Reform of Ontario’s Public Services, headed by Don Drummond and a team of three. Mr. Drummond had been an Assistant Deputy Minister in the federal Department of Finance, and TD Bank’s Sr. Vice President and Chief Economist. He is now at Queen’s University. Those weighty credentials produced a very heavy 562-page report with 362 recommendations, of which 105 concern the health system.2 The overall conclusion was that reform should aim to save money and improve quality mostly by shifting resources from acute (hospital) care to care for chronic diseases. Drummond says overall government spending growth must not exceed 0.8% annually for several years. Achieving this while covering population growth and inflation will require a 16.2% cut in program spending. Failure will mean debt and deficits will almost double by 2017-18. Health now consumes just over 40% of all government program expenses. Spending growth has exceeded growth in GDP, provincial revenues, and general inflation. The Commission wants to hold annual increases in health care spending to an unprecedented 2.5%, which means smaller increases in education and social programs, and 2.4% overall reductions in all other spending. This will be a particular challenge since civil service compensation accounts for about half of all program spending. According to Statistics Canada, through December 2011, government jobs across Canada had increased in every recent year (2007-11).3 Even when overall employment dropped 1.6% in 2009, jobs in public administration still increased 0.5%. Drummond acknowledges that Ontario still has one of the lowest cost provincial governments. Where does this leave employers? First, the provincial government has cancelled a proposed corporate tax reduction. Ontario has already announced a total review of the "hodgepodge" of business support programs – some $3.6 billion under eight different ministries. Regarding drug plans, the Commission suggested both the government and employers should exercise "greater control". Within the provincial drug plan, Drummond noted that seniors (age 65+) still account for about 75% of all spending, and are protected with very low co-pays that do not exceed $100 annually plus a per prescription fee of $6.11. It recommended that entitlement for the provincial drug plan should be based instead on income. Again the budget announced that seniors with the highest incomes (over $100,000 single and $160,000 family) would pay much more, but the government stopped short of making the drug plan truly universal. Government savings could not be projected, but those affecting age-based entitlement would affect many public sector and traditional industry employers with retiree drug coverage. This change could be very expensive for affected employers. Bottom line: the employer community is not well-equipped to organize its own health information, know its starting point, and present recommendations to the province. However, the Ontario health ministry has previously shown interest in consulting with the private payer community, so it may be open to first discussing changes that might impact employers. The reality is that what started in Ontario will not stay in Ontario. Employers across Canada will need more support from their insurers and advisors to help understand their own stake, and provide input for new government policies and programs. The dilemma is that if employers don’t ‘own’, manage and effectively communicate their position on health, in the name of budget control, governments are likely to manage it for them. Sources: (1) See: http://www.td.com/document/PDF/economics/budgets/govt_budget_20120222.pdf. (2) The full report is available at: http://www.fin.gov.on.ca/en/reformcommission/ (3) See: http://www40.statcan.gc.ca/l01/cst01/econ40-eng.htm
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Categories: Editorial