What is Ted Flemming up to?

Ted Flemming, Minister of Health, has certainly received plenty of press recently. Praise from some, condemnation from others, and befuddlement from a few. He has engaged in a dispute with the province’s doctors over billing practices and wants to cap billing. What is he up to? It seems to me that Flemming is trying to portray doctors (who, let’s face it, earn far more than the average New Brunswicker) as major players in driving health care costs upwards. However, if we examine the inflation-adjusted data, physician payments have been fairly steady over the past few years. His other target, administration costs, also do not appear to be increasing, and, in fact, represent about 2% of the total health care expenditure. Drug costs and nursing home costs appear to be the major contributors to increasing health care expenditures over the past decade, although the largest proportion of the bill comes from hospital operations.

Doctors and administrators do share one thing – they are both seen as well-paid positions and thus are targets of populist anger. So is Flemming after credibility with the volatile populist voter? Is he trying to build up support amongst the public for a future bid for the Premier’s Office? Or is he just a loose cannon? We will have to wait and see, I guess.

Some observers have claimed that Flemming’s comments and his now – abandoned plan to eliminate student intern positions from doctor’s practices will discourage doctors from working in NB. That might be the case, and it might be a deliberate, albeit Machiavellian, strategy. After all, fewer doctors means fewer patients being examined and fewer tests being ordered. Perhaps the media should be asking some health care economists to weigh in on the issues of physicians per capita and salary vs fee-for-service as they relate to holding down health care costs.

Meanwhile, back at the Department of Health, I expect that those in charge of the two remaining health regions are occupied with things other than doctor remuneration. They have a mandate to hold costs down and their largest target is hospital operations. So, while Mr Flemming is entertaining the media with his ‘blunt talk’, they are deciding which ERs and which hospitals to close.

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How New Brunswick spends its health care dollars

In a previous post, we saw that if provincial government spending in New Brunswick over the past few decades is adjusted for inflation, non-health care spending has not increased since the mid-90s. Rising health care expenditures are largely responsible for spending increases since then. And how are those health care dollars being spent? The numbers below suggest that NB is not doing as well as some other provinces with respect to hospital operations costs; that might mean there are some potential savings to be had there. But I expect those ‘savings’ to be reallocated to other health care spending issues (e.g. wait-time reductions). The goal should not be to reduce spending by a certain amount, or keep increases at a particular rate, but to improve services while spending the same proportion of tax revenue.

Let’s start with a re-post of this chart (using data from Statistics Canada and CIHI’s National Health Expenditure Database), where spending (EXP) and revenue (REV) patterns for the past few decades are adjusted for inflation:

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Decades of Deficits: Revenue Sources and Spending in New Brunswick

New Brunswick is currently experiencing a fiscal crunch. Revenues are below expectations and expenditures are proving difficult to control. Meanwhile the Federal Governmnent has announced a new formula for allocating equalization payments that will tie increases in health care payments to GDP growth, plus those payments will (after 2015) be allocated on a per capita basis. That might effectively reduce payments to NB once inflation, slow population growth, and growing health care costs are factored in. Fortunately, although the provincial debt is approximately $9 billion, interest rates are now low by historical standards and debt servicing has not yet caused a crisis. That is just as well, since slowing economic growth is doing a fine job of reducing government revenue all on its own.

The aim of this post is to present some historical background to NB’s funding sources and examine the role of health care spending as a driver contributing to spending increases over time. More details on how NB spends its revenue, and how that compares with spending in other provinces will be provided in following posts. As we will see (note the last chart below), when we adjust spending by inflation, government spending increases on things other than health care have been kept fairly modest in recent years.

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