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Romanow's big health-care gamble
Roy Romanow's report on health-care hangs on an economic bet and a political gamble, says JEFFREY SIMPSON
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From Wednesday's Globe and Mail

The bet is that the billions of extra spending he will recommend can be found in burgeoning federal surpluses. The political judgment is that health care's iconic status will shoulder aside all other competing claims on the public purse.

Canadian politicians made an economic bet on medicare once before, and got it wrong. It wasn't their fault, however. The economy just didn't perform as they had anticipated.

In the 1960s, when political actors debated and agreed on medicare, economic growth seemed endless, and certainly capable of handling the new national program. But wham. In 1973, the oil crisis hit all Western economies. Growth slowed. Government revenues slackened. The world plunged into stagflation: high inflation, low growth and high unemployment.

The brutal recession of the early 1980s arrived. Government revenues fell, but health-care spending raced ahead at 5.1 to 5.6 per cent per year after inflation. Struggling with slipping revenues and rising costs, provincial governments began to try to cut costs. They capped payments to doctors, some of whom in turn demanded patients' payments, or extra-billing. The result was the now-sacred Canada Health Act.

Skip ahead two decades. Mr. Romanow, like many others, believes projections for a ballooning federal surplus. That balloon, he believes, can accommodate billions of additional spending. Canadians can have their health-care cake and eat it, too: more health services without higher taxes or cuts elsewhere.

Now comes the political judgment. Lots of other groups are eyeing the same projected surplus. The military, aboriginals, cities, climate change, poverty, poor provinces, Via Rail, farmers, displaced fishermen, universities -- advocates for these and many other causes want their share. None, bets Mr. Romanow, can eclipse health-care's claims.

Health-care costs have soared again after severe restraint from 1993 to 1996. Since then, spending after inflation has risen 3.6, 5.9, 6.6, 7.6, 5.7 and 2.5 per cent yearly. The provinces complain the system is not "sustainable."

By that, the provinces mean two things. First, existing health-care costs cannot be restrained; that is, brought closer into line with inflation. Second, health-care increases are "crowding out" spending on other government services.

Provinces insist the only way out of the box is lots more federal money. They got $24-billion over four years before the last election, but that's not nearly enough. They want billions more, and Mr. Romanow will recommend they get it.

Mr. Romanow doesn't accept the "unsustainable" argument because of his economic bet and political judgment. More money will be in general revenues, courtesy of these economic projections. The political side will be there, too, because the public's demand for health-care spending will trump other claims.

But what if he's wrong? What if, as happened three decades ago, Canada builds into its spending structure additional billions for health care, and the economic assumptions don't pan out?

Mr. Romanow might ask: Where's the funding problem, anyway? Health care is taking about the same share of total tax and revenue as 20 years ago. Indeed, it is, but that's because non-health-care spending has been in relative decline to make room for the health-care budgets.

Canada, he will argue, is now spending 9.5 per cent of national income on health care, less than a few years ago and less than the share spent by some other countries. Yes, but most of those countries (excluding the United States) cover more services, making the comparison shaky.

There has been crowding out by health care. Mr. Romanow, as a former premier, ought to know that. Now, he wants to raise health-care spending -- and put a floor under that spending so it cannot decline. That's fine, as long as the economy booms. If the economy dips, a fixed and higher health-care budget will squeeze everything else.

But what choice did Mr. Romanow have? He ruled out more private money. He nixed a dedicated tax for health care, as proposed by the recent Senate report. Having ruled out these alternatives, he could only find more money in general tax revenues, based on his economic bet and political judgment.

The only question that remained was how much more money to recommend, defended by an appeal to Canadian "values," mixed with a few suggestions for change in delivery systems, accountability and transparency, leading to a more expensive (and better?) status quo.

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