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Fraser Institute

Bill Maher is right about Canadian health care

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4 minute read

From the Fraser Institute

By Mackenzie Moir

Recently, popular American comedian and talk show host, Bill Maher, took aim at some of Canada’s public policy failings in one of his monologues. In entertaining fashion, Maher highlighted our high housing costs, unemployment rates and “vaunted” health-care system.

Indeed, citing work published by the Fraser Institute, he explained that after adjusting for age, Canada spends 13.3 per cent of our economy on health care (2020), the highest level of spending by a developed country with universal coverage that year. And that Canada has some of the poorest access to timely appointments with family doctors when compared to our peers.

Unfortunately, while that’s where his segment on health care ended, the bad news for the Canadian system doesn’t stop there.

On top of Canada continuing to be one of the most expensive universal health-care systems in the world, we get little in return when it comes to both available medical resources and wait times. For example, among high-income countries with universal health care, Canada has some of the lowest numbers of physicians, hospital beds, MRI machines and CT scanners.

And in Canada, only 38 per cent of patients report seeing a specialist within four weeks (compared to 69 per cent in the Netherlands) and only 62 per cent report receiving non-emergency surgery within four months (compared to 99 per cent in Germany).

Unfortunately, wait times in Canada aren’t simply long compared to other countries, they’re the longest they’ve ever been. Last year the median wait for a Canadian patient seeking non-emergency care reached 27.7 weeks—nearly three times longer than the 9.3 week-wait Canadians experienced three decades ago.

This raises the obvious question. How do other countries outperform Canada’s health-care system while also often spending less as a share of their economies? In short, their approach to universal health care, and in particular their relationship with the private sector, departs drastically from the approach here at home.

Australia, for example, partners with private hospitals to deliver the majority (58.6 per cent) of all non-emergency surgeries within its universal health-care system. Australia also spends less of its total economy (i.e. GDP) on health care but outperforms Canada on every measure of timely care.

Even with restrictions on the private sector, Canada has some limited experience that should encourage policymakers to embrace greater private-sector involvement. Saskatchewan, for example, contracted with private surgical clinics starting in 2010 to deliver publicly-funded services as part of a four-year initiative to reduce wait times, which were among the longest in the country. Between 2010 and 2014, wait times in the province fell from 26.5 weeks to 14.2 weeks. After the initiative ended, the province’s wait times began to grow.

More recently, Quebec, which has some of the shortest wait times for medical services in the country, contracts out one out of every six day-surgeries to private clinics within the publicly-funded health-care system.

Maher’s monologue, which was viewed by millions online, highlighted the key failings of Canada’s health-care system. If policymakers in Ottawa and the provinces want to fix Canadian health care, they must learn from other countries that deliver universal health-care at the same or even lower cost, often with better access and results for patients.

Business

Broken ‘equalization’ program bad for all provinces

Published on

From the Fraser Institute

By Alex Whalen  and Tegan Hill

Back in the summer at a meeting in Halifax, several provincial premiers discussed a lawsuit meant to force the federal government to make changes to Canada’s equalization program. The suit—filed by Newfoundland and Labrador and backed by British Columbia, Saskatchewan and Alberta—effectively argues that the current formula isn’t fair. But while the question of “fairness” can be subjective, its clear the equalization program is broken.

In theory, the program equalizes the ability of provinces to deliver reasonably comparable services at a reasonably comparable level of taxation. Any province’s ability to pay is based on its “fiscal capacity”—that is, its ability to raise revenue.

This year, equalization payments will total a projected $25.3 billion with all provinces except B.C., Alberta and Saskatchewan to receive some money. Whether due to higher incomes, higher employment or other factors, these three provinces have a greater ability to collect government revenue so they will not receive equalization.

However, contrary to the intent of the program, as recently as 2021, equalization program costs increased despite a decline in the fiscal capacity of oil-producing provinces such as Alberta, Saskatchewan, and Newfoundland and Labrador. In other words, the fiscal capacity gap among provinces was shrinking, yet recipient provinces still received a larger equalization payment.

Why? Because a “fixed-growth rule,” introduced by the Harper government in 2009, ensures that payments grow roughly in line with the economy—even if the gap between richer and poorer provinces shrinks. The result? Total equalization payments (before adjusting for inflation) increased by 19 per cent between 2015/16 and 2020/21 despite the gap in fiscal capacities between provinces shrinking during this time.

Moreover, the structure of the equalization program is also causing problems, even for recipient provinces, because it generates strong disincentives to natural resource development and the resulting economic growth because the program “claws back” equalization dollars when provinces raise revenue from natural resource development. Despite some changes to reduce this problem, one study estimated that a recipient province wishing to increase its natural resource revenues by a modest 10 per cent could face up to a 97 per cent claw back in equalization payments.

Put simply, provinces that generally do not receive equalization such as Alberta, B.C. and Saskatchewan have been punished for developing their resources, whereas recipient provinces such as Quebec and in the Maritimes have been rewarded for not developing theirs.

Finally, the current program design also encourages recipient provinces to maintain high personal and business income tax rates. While higher tax rates can reduce the incentive to work, invest and be productive, they also raise the national standard average tax rate, which is used in the equalization allocation formula. Therefore, provinces are incentivized to maintain high and economically damaging tax rates to maximize equalization payments.

Unless premiers push for reforms that will improve economic incentives and contain program costs, all provinces—recipient and non-recipient—will suffer the consequences.

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Alberta

Alberta’s fiscal update projects budget surplus, but fiscal fortunes could quickly turn

Published on

From the Fraser Institute

By Tegan Hill

According to the recent mid-year update tabled Thursday, the Smith government projects a $4.6 billion surplus in 2024/25, up from the $2.9 billion surplus projected just a few months ago. Despite the good news, Premier Smith must reduce spending to avoid budget deficits.

The fiscal update projects resource revenue of $20.3 billion in 2024/25. Today’s relatively high—but very volatile—resource revenue (including oil and gas royalties) is helping finance today’s spending and maintain a balanced budget. But it will not last forever.

For perspective, in just the last decade the Alberta government’s annual resource revenue has been as low as $2.8 billion (2015/16) and as high as $25.2 billion (2022/23).

And while the resource revenue rollercoaster is currently in Alberta’s favor, Finance Minister Nate Horner acknowledges that “risks are on the rise” as oil prices have dropped considerably and forecasters are projecting downward pressure on prices—all of which impacts resource revenue.

In fact, the government’s own estimates show a $1 change in oil prices results in an estimated $630 million revenue swing. So while the Smith government plans to maintain a surplus in 2024/25, a small change in oil prices could quickly plunge Alberta back into deficit. Premier Smith has warned that her government may fall into a budget deficit this fiscal year.

This should come as no surprise. Alberta’s been on the resource revenue rollercoaster for decades. Successive governments have increased spending during the good times of high resource revenue, but failed to rein in spending when resource revenues fell.

Previous research has shown that, in Alberta, a $1 increase in resource revenue is associated with an estimated 56-cent increase in program spending the following fiscal year (on a per-person, inflation-adjusted basis). However, a decline in resource revenue is not similarly associated with a reduction in program spending. This pattern has led to historically high levels of government spending—and budget deficits—even in more recent years.

Consider this: If this fiscal year the Smith government received an average level of resource revenue (based on levels over the last 10 years), it would receive approximately $13,000 per Albertan. Yet the government plans to spend nearly $15,000 per Albertan this fiscal year (after adjusting for inflation). That’s a huge gap of roughly $2,000—and it means the government is continuing to take big risks with the provincial budget.

Of course, if the government falls back into deficit there are implications for everyday Albertans.

When the government runs a deficit, it accumulates debt, which Albertans must pay to service. In 2024/25, the government’s debt interest payments will cost each Albertan nearly $650. That’s largely because, despite running surpluses over the last few years, Albertans are still paying for debt accumulated during the most recent string of deficits from 2008/09 to 2020/21 (excluding 2014/15), which only ended when the government enjoyed an unexpected windfall in resource revenue in 2021/22.

According to Thursday’s mid-year fiscal update, Alberta’s finances continue to be at risk. To avoid deficits, the Smith government should meaningfully reduce spending so that it’s aligned with more reliable, stable levels of revenue.

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