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Jeffrey Simpson (Brigitte Bouvier For The Globe and Mail)

Jeffrey Simpson

(Brigitte Bouvier For The Globe and Mail)

JEFFREY SIMPSON

To rein in health costs, rein in salaries Add to ...

As two recent reports have demonstrated, Canada remains among the world’s top five spenders among countries with largely public health-care systems.

Canada spends 11.2 per cent of its gross domestic product on health, from public and private sources. What’s been driving that spending over the past decade or so?

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Many factors go into the long answer; the incomes of those who work in the system provide a shorter (though incomplete) version. Doctors and nurses have done very well indeed in recent years, although their associations and unions might deny it. Their incomes have gone up faster, and in some cases much faster, than average wages across the economy.

How well they did is laid out in recent reports from the Canadian Institute for Health Information and the Organization for Economic Co-operation and Development.

According to the OECD’s 209-page Health Indicators at a Glance 2013 publication, the remuneration of Canadian medical specialists relative to the average wage is the third-highest in the OECD, 4.7 to 1. General practitioners have the second-highest ratio, tied with two other countries, at 3 to 1.

From 2005 to 2011, Canadian specialists’ salaries were among the fastest rising in the OECD. General practitioners’ rose above the OECD average. Of course, there were variations across provinces and disciplines within medicine, Canadian physicians who work within largely public systems on the whole are very well paid by OECD standards.

Canadian nurses did well, too. Nurses who work in hospitals (and not all do, of course) saw their remuneration grow by 4.8 per cent yearly in 2005-2008 and by 3.6 per cent in 2008-2011, according to the OECD.

Labour compensation eats up 60 to 70 per cent of hospital costs. The largest single component of a hospital’s work force is the nursing staff. If the nursing budget goes up above the rate of inflation, it’s hard for hospital administrators not to keep their institution’s costs from going up at a roughly similar rate.

Physicians’ costs ($31.4-billion) are the third biggest charge to health care, after drugs ($34.5-billion) and hospitals ($62.6-billion). Doctors’ share of the health-care pie rose to 14.8 per cent in 2013 from 13 per cent in 2005. One difference, of course, is that 98.5 per cent of all physicians’ costs come from the state, versus 36 per cent for drugs.

Physicians sometimes don’t like to hear this, but the Canadian Institute for Health Information laid out what’s been happening in its report National Health Expenditure Trends, 1975 to 2012: “Increases in physician fees have been above rates of inflation.” From 2005 to 2011, physician incomes went up faster than hospital budgets or drugs. Their fee increases averaged 3.6 per cent a year in those years. Those increases were larger than wage gains for other health and social-service workers, except nurses, as reported by CIHI.

For the past two years, wage gains by doctors and nurses have slackened, as part of the overall lower increases in health spending across Canada. The past two years, health care has been rising at about 2.5 per cent, compared to about 7 per cent each year from 2000 to 2010.

There are lots of ways for governments to try and hold this slower rate, but an important one is not to allow physicians’ and nurses’ incomes to soar, as they recently did. A fair deal for both would be to allow wage gains for the next decade near the inflation rate, adjusted for population growth.

Anything more would be a return to the years of unsustainable growth in these incomes and in overall health-care budgets. Yes, there are a host of other things that must be done to keep health-care increases on a more modest track, but curtailing the increase for providers is an important one.

What happened in recent years was completely predictable and avoidable. Put a large amount of additional money into any public enterprise without the money being tied down and targeted, and well-organized groups within the enterprise will mobilize, find all sorts of reasons why they need more, flex their collective muscle and, usually, get governments to yield.

Which is exactly what recently happened. A mistake was made from 2005 to 2011 that, once made, should not be repeated. By world standards, Canadians doctors and nurses are very well paid. They should be content. But are they? And will they be?

 

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