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Ambulances parked at Toronto Western Hospital on July 14.Fred Lum/the Globe and Mail

The woes of Ontario’s health care system this summer, with emergency rooms forced to curtail operations, are just a prequel to the cost pressures that are set to build in the province over the next two years.

The provincial government is planning on a rapid deceleration in the growth of health care spending through to fiscal 2025. That pullback is so sharp that the health budget is not projected to keep pace with the combined effects of inflation and population increases, meaning that spending on each resident, adjusted for inflation, will decline.

Or to look at it another way, the Ontario government would need to spend $3.5-billion more to keep inflation-adjusted per-capita health spending flat in 2025.

Of course, that effective funding cut doesn’t appear in the Ontario budget, tabled again last week after the summer provincial election. As the chart below shows, health care expenditures are projected to rise steadily – at least in nominal terms – through to fiscal 2024-25.

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But that expansion of Ontario’s health care budget slows over time, both in dollar amounts but most noticeably in percentage terms. As this second chart shows, the percentage growth tails off quickly, after the double-digit increase last year. In fiscal 2025, the Progressive Conservative government projects, health care spending will rise by less than 1 per cent – an amount that would offset less than one-quarter of the combined effect of expected inflation and population growth.

Ontario has not indicated why it thinks such fiscal restraint is possible, although it has moved to slow the growth in the wages of health care workers under Bill 124. The Finance Ministry did not comment on the matter on Thursday. But in an earlier statement, the Health Ministry had noted that health care spending is slated to rise an average of 3.3 per cent a year from fiscal 2021-22 to fiscal 2024-25.

And other provinces are not seeing the same opportunities, if they exist. Quebec, for instance, is forecasting an increase in health care spending in fiscal 2025 of 4.5 per cent, five times greater than that of its neighbouring province.

As this third chart shows, that means that the health care dollars that Ontario spends on each resident will fall in inflation-adjusted, or real, terms. Without additional funding, the province’s real per capita spending will fall from its peak last year through to fiscal 2025, when it will be only marginally higher than in fiscal 2021.

In effect, the government is proposing to allow inflation and population growth to gradually erode the double-digit expansion in health care spending last year. To avoid that erosion, Ontario would need to boost its planned health care outlays by hundreds of millions of dollars later rising to $3.53-billion by fiscal 2025, as this final chart indicates.

Even those outlays would only keep health care funding per person constant; it would not necessarily deliver any improvement in services.

However, there are some caveats. For one, the government has set aside a $4.6-billion contingency fund in the current fiscal year that is larger in subsequent years. It could draw down on that fund to boost health care spending, and would need to use only about 13 per cent of that money in the current fiscal year to keep real per capita spending flat.

And Ontario’s revenues for the current year are already running ahead of budget projections, according to the province’s first-quarter results released last week. The PC government did not use that windfall to boost spending this year. But if revenue continues to rise faster than expected, it could use some of that cash to plump up the health care budget.

On the other hand, the province has also capped wage increases in the public health care sector through to 2025 with Bill 124, sparking significant opposition from nurses and other groups of workers.

Last, the Ontario Health Ministry unveiled plans on Thursday to alleviate strains on the province’s health care system. Some of those changes, such as freeing up hospital beds by moving more seniors into long-term care facilities, could increase efficiencies. The plan also includes increased use of existing private clinics operating within the province’s publicly funded system.

So far, however, that plan does not come with any new spending attached, or at least none that is being publicly disclosed. In a statement, the province’s Finance Ministry said the next fiscal update, to be delivered by Nov. 15, would update the budgetary outlook for any new spending that the government decides on, including in health care.

Whatever the caveats, the budget – tabled at the same time as the first-quarter update was made public – clearly expresses the PC government’s intention to slow down the growth of health care spending.

For Raisa Deber, professor at the Institute of Health Policy, Management and Evaluation at the University of Toronto, that slower growth is a warning sign that costs could be squeezed out of the public system as patients are shifted from hospital beds.

Such an approach would free up beds. But Prof. Deber said it would also mean that patients would foot the bill for some medical services, such as physiotherapy and pharmaceuticals, that would be covered by the public purse if delivered in hospital.

Other experts are cautiously optimistic. Erna Snelgrove-Clarke, vice-dean and director of the school of nursing at Queen’s University, said there are reforms that could enhance the quality of medical care without costing more money. Indeed, properly done, such changes could result in savings.

And some new approaches could come together quickly. Dr. Snelgrove-Clarke said a group of four doctors and four nurse-practitioners are forming a joint practice in the Kingston area that will take aim at the shortage of family physicians by pooling their services.

She said constrained budgets could even become a catalyst for such long-overdue changes. “We don’t have a choice, we need to fix what we have.”

Tax and Spend examines the intricacies and oddities of taxation and government spending.

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