Monday, 3 April 2017


When the Ball government announced a cut of 93 positions in the health care system last week, for savings of $7.6 million, budget watchers expressed sympathy for the 56 employees actually let go but, otherwise, waited for the next shoe to drop.

And with good reason. 

Health care consumes 36% of an $8.5 billion operating account spending on the day-to-day operation of programs and services (source: Budget Update). $1.58B of that sum constitutes deficit the shortfall between cost and the revenues available to pay for them. The difference is financed by government’s borrowing program.

Health care’s proportionate share of the deficit this year alone amounts to $569 million. The sum is in addition to the borrowing done by the health Boards directly (several million) which only shows up on the government’s books in the “Total Debt”. And a full accounting of health care’s cost should include infrastructure the amount applied to the capital account. Putting those sources of health care deficit together you would discover a shortfall well in excess of $600 million per year. 

But, for the sake of clarity, we'll just stick with just the operating deficit.

It would seem sensible to assume that other sectors of government can’t absorb overspending by health care. So what does this mean for the health care system?

The government has stated that it plans budget balance in 2022-23 which few believe but the achievement over the next six budgets equates with annual cuts to health care of around $95M...a figure that is higher when the effect of fast-rising debt servicing and related costs like the deferral of pension contributions are factored in. But, again, let’s keep the arithmetic straightforward.

A cut of $7.6 million against the total problem of $569 million or even against $95M in one year suggests more cuts are inevitable. 

When? That’s another story, but I’ll take a guess at the end of this piece.

Still, the health care conundrum is obvious: what will the system look like if we cut over half a billion dollars from the budget even over six years? What can we expect if we don’t?

This post is not intended to deal with such weighty topics. That will take some time, even after the Budget is delivered on April 6th.  Today’s post is intended to provide readers with a documented appraisal of the enormity of the challenge one that is singularly ours.

The numbers are important to understand because only they can give some context to any remedy.  

Secondly, it seems clear that we have to put forward a new “model” of how health care should be administered. And we have to do it soon. Creating a longer queue for health services with cuts to personnel won’t work. The inescapable fact even if it seems cliché is that we have to do more for less. We have to both change the system and cause operating costs to drop.

The post “Dr. Parfrey’s Refreshing Frankness“ triggered much interest. Possibly it exposed the nasty truth that we have not been good stewards of this gift of wealth, education, and technology.

The raison d’etre of Parfrey’s group “Choosing Wisely NL” needs no further explanation. They just need to get to work. We need other such groups with similar goals in different areas of heath care. We will have to co-ordinate those efforts on an urgent basis without getting mired in hundreds of studies and slowed by an even larger web of bureaucracy. 

The announcement by the Health Care Corporation of 176,000 missed specialist appointments no shows last year alone, also resounds. That figure is for Eastern Health. Presumably the other Boards have a story that matches that one. Who is minding the shop? Indeed.

Is the public willing to countenance waste while queues for consultations and treatment get longer? Is health care such a 'sacred cow' that it is above scrutiny?

It is worth reminding that other provinces have managed their health care systems better.  We invoke the “rural” card putting blame on a dispersed population as if ours is the only rural jurisdiction in Canada.

A series of exhibits prepared by the Canadian Institute for Health Information will help provide a better understanding of this and other issues raised in this piece. All but the first formed part of a presentation by Dr. Wade Locke to the Chartered Professional Accountants in February. The remarks contained within the exhibits (mostly highlighted in red) are solely his work. Outside the exhibits, unless noted, the editorializing is mine.

Let’s start here:

This exhibit was part of the Budget document for the current fiscal year (2016-17). Health and Community Services consume $2.95 billion or 40.8% of all current account expenditures. Health care, alone, represents 36% of the current account.

Prior to 2006, NL’s expenditures remained below the Canadian average. But after 2007, as the province began to record increasing oil-related revenues, the cost of health care and virtually all government services also increased dramatically; health care disproportionately. By 2016, the cost of health services in NL had grown to 115% of the Canadian average. 

Nova Scotia, in contrast, has been more disciplined. Note in the next exhibit how expenditures in NL began leaping ahead of NS and the other Maritime provinces by 2009. 

Health care costs in Ontario and Quebec did not come under the spell of a “goldilocks” megaproject economy, as they did in NL. Those provinces benefit from the scale economies afforded by a large urban population, but they have large rural areas too.

The rural card is trotted out by NL politicians even as already noted. Saskatchewan and Manitoba can easily make a similar claim. Still, we manage to spend more per capita.

NL failed to stay in line even with Alberta (see next exhibit) which has sustained higher economic or GDP growth and higher population growth, too.

In his presentation Locke noted that, by 2014, NL had exceeded the national average expenditure on health care by 27.3% and exceeded the per capita average expenditure in all other provinces.

A couple of other statistics the Memorial economist used were also striking. The per capita health care expenditure on the 85‐89 age category “is 54% higher than Canadian average”. He noted: “If no other cost drivers change (doctor’s salaries, cost of band aids, etc.), then the median age (currently 45 years) person’s health cost will increase by 48% in 10 years, increase by a further 61% in the next 10 years or in 20 years time, it will cost 139% ($3,706 to $7,363) more to treat that person.”

Other exhibits confirm NL’s increasing challenges with health care costs. The ones included here are sufficiently compelling.

In short, NL can’t afford the status quo even if that is what the government chooses.  

The question we need to ask is this: will health care remain a ‘free-for-all’ and broke, or can we manage it better, retain its universality, and keep it ‘free’ from both fees and queues?

Likely, Parfrey’s lament over waste of health care resources reflects the tip of the iceberg which suggests more for less is actually possible.

What do we need to hear from the Premier and the Minister of Finance? 

That politics will be taken out of health care? That would be nice. But it's too much to expect.

The government needs to take the basic steps towards a new health care management model. It should attack inefficiency, exact financial penalties on waste, provide publicly available costing for medical procedures, employ the logistics of the construction industry (though not Nalcor’s), and deal with rural medical services that are patently unsustainable.

MCP needs reform. It still pays ophthalmologists, for example, for work now largely done by machines and new technology as if they were never invented. The government's drug program is costing far too much. Physicians' compensation should be tied to any new productivity model. Telemedicine, incubated here decades ago, must be better utilized as part of rural medical services. Those are just a few items for a reform agenda. 

Major decisions on the health care architecture also need to be taken.

Can we afford hospitals in both Grand Falls and Gander? The hospital in Port aux Basques, having opened a new one in Stephenville? A billion dollar hospital for Corner Brook? Certain medical services, like dialysis, in small rural centers?

If the Minister of Finance makes no mention of a new management model, you are right to despair that this government will ever intelligently deal with our fiscal nightmare.

Can we do better with less?

In a system that now spends well over half a billion dollars more than the pro rata share of total revenues each and every year we have no choice.

I doubt that the Ball government will see it quite that way. 

Most likely, the cuts announced last week just got the bad news out of the way. I’m betting that it will kick the fiscal ‘can’ down the road again. The Finance Minister will invoke the “Wiseman Plan” (Tory Finance Minister under Paul Davis) based upon the most optimistic scenario for oil prices and offshore production and, of course, hope.

Whatever the government does unless it announces a massive reform initiative the same problems threatening the system with collapse today won't go away, no matter what spin the Finance Minister has ready for Thursday.  
Editor's Note: The comments section is an important part of this Blog, contributions to which are very much welcomed. To facilitate wide readership of them I want to limit frequent singular conversations which are better suited to a different platform without discouraging readers' comment and analysis. I propose that commentators limit their contributions to one comment and to no more than one reply where a third party has responded to the initial comment. Excess comments will be deleted by the administrator. Hopefully everyone will find this approach fair and reasonable. But, by all means, have your say. It just makes for a better blog.


  1. We may be doomed by demographics. Health expenses are high for the elderly and the majority of the population will soon be old. In 2012 we had 16% of the population over 65 and the median age was 44, the highest in Canada. Young people are leaving for jobs making the situation worse. We could provide basic care fairly cheaply. If we want full service (coronary bypasses, cataract removal, regular ultrasounds of aneurysms and hundreds of other common procedures that are rarely need in the young) we will be forced to either ration or rack up debt that a future generation will have to repay or default on.

    There is no doubt we can reduce a lot of wasteful spending on capital projects, unnecessary procedures and overhead but I don't think it is fair to compare health spending with younger populations. I suppose there is a silver lining -- a population doesn't stay old forever.

    1. I wouldn't be to quick to run the old people into the ground..Most of us old people your talking about paid a lot of tax dollars into the system and now we are the problem?????? There are lots of waste we can suck up for sure...Ill be damed if now after working all my life and paying taxes in the 40 to 50 thousand range yearly in this country to now have some one say I'm to old and not important...I have a friend who now has been waiting for about 6 months to be diagnosed and now has weeks to leave because of the system. Screw the government and screw the people who think health care is not important after 65...We had a better health care system when we were a have not province..I have lost to many friends because of waiting to be diagnosed....

  2. Good to see health care costs again on the agenda of UG. Dr Parfrey has used a number of 20 percent waste on heath care and stated 600 million potential saving (with Debbie Cooper). 600 Megawatts is what I estimated as wasted on our island electrical system, about 30 percent of our 1750 peak load generation. So I respect the good Drs numbers, more so having had to deal with the health care issues and seeing first hand the inefficiencies.
    I expect efficiency in health care is like expecting our power companies doing meaningful customer efficiency (we are second worst in the country, and apparently the power companies here are proud of it).
    From my visit last week for an MRI, I discovered that the good Drs name is mud, in some quarters. He had made a serious public boo boo, which seems to have gone unnoticed by the media. That should not take away from his message on waste in the health care system.But if there is waste, then cutbacks can have impacts for some that are unwelcome. Who can be popular with hearing the harsh truth that you work in a system that is very wasteful, meaning some positions are unnecessary, changes are needed and perhaps wages rolled back some. Indeed, 3 or 4 of our top doctors make more in yearly salary that Nalcor`s CEO.
    Still waiting to hear that they have initiated the reminder to clients that they have a scan appointment. It is not in effect yet. This is incompetence. Surely volunteers could provide this service, if they cannot find savings to fund it. And poor medical training for many is an issue, from nurses to technicians to doctors. I have been assured by most all medical personel here that a EGFR reading of 60 for a kidney function means you have a good kidney system, when in reality you have lost 50 percent of the filtering function, and at a phase when serious precautions are needed to avoid further damage.
    Winston Adams

  3. My dentist's office sends me email and text reminders of appointments using simple and cheap software.

  4. As a lucky senior, (Still healthy and living independently with my wife), my overall concern is that we put our limited resources into Education. If we cannot give opportunity to our grandchildren, similar to that enjoyed by our 50's generation, how can we expect them to live more productive, healthy lives? Preventive health spending for those who have life expectation to survive, Education spending for the young to avoid depression, mental illness, drug dependence, and live useful, purposeful lives.

    1. Good point Robert; but also what you indicate is part of the Wise Choices to get this enshrined into policy is the problem......UG is aiding with this awareness, but it has to go beyond awareness.

    2. From the Exhibit II, Debt Charges in the 14% range and rising, is the elephant in the room. NL should unload the Muskrat "asset" with slim expectation of positive return on capital, ASAP. Hello Emera/Fortis/HQ.

    3. I missed this 14 percent, some 1 billion a year on interest charges. Transportation and works is 356 million, on third of what we pay on interest, and this in not only for road and bridge upkeep but works includes new construction:schools , hospitals, etc including maintenance. we have some 1000 members in our Construction Association depending on this work as carpenters, electricians , plumbers, material wholesalers, design engineeers , painters, plasters, labours etc.......and interest payments is 3 times more than allocated for all these trades. It`s insane.....and where has our construction association and business community stance on this ........quiet as a mouse! Are they ignorant of this....or did Uncle say this info was presented to the Board of Trade recently. Where will be the Trade, except for payments to the banks and bond agencies. Are we headed for a tragedy because of reckless spending and failure to reign in wasteful spending. Muskrat should have been halted last year as a first priority, and health care spending follow as second on the list. It is obvious. And now a gutting of scrimp and crab quotas and not enough cod and caplin recovery to take up the slack. April 6th.....Black Thursday or kick the can down the road.......

  5. Did you know that Ches Crosbie has a VISION?
    In his latest mailing he mentions his Connect with Crosbie tour........sound like Buddywashisname tour..........but he uses some writing technique, see Connect with Crosbie sounds better than Attach with Crosbie or Link up with Crosbie. If it sounds good, it must be Make America Great Again!...first used by Lindberg in the 1930s.
    Now Ches says he has learned people are afraid of job security, and they have a right to be concerned, and that our budget April 6 th raises one critical issue: will it result in a credit downgrade. Ches says we have only 2 downgrades left before no one will lend to Ndld. So if we get a downgrade now and another next year then it is all over? Before Ches can take over?
    This is not just a crisis says Ches, it is a looming financial EMERGENCY.
    And you thought the Uncle was perhaps making a fuss?
    With 2 downgrades , public service cheques will not be issued, and contractors will not be paid..........until the federal govn steps in, says Ches. In this budget there must be a credible plan............and Ches says "his experts" says there likely will be no plan. Who are Ches's experts? Don't say! Wade Locke I wonder?
    So , no plan, a downgrade says Ches, ...therefore only one downgrade to go.....and this is not fear mongering. Why? Because Ches has a trademark! It is written on his forehead. "My Trademark is TO TELL it like it is" says Ches. Sounds good .must be good. Could have said My trademark is tell the truth I see my experts tell me what the truth is.
    Ches studies philosophy......What is Truth one once asked. Your truth and my truth?
    If I become Leader in 2o19, I can find creative solutions to our crisis and help set this province on a path to a brighter future, says Ches......but I can't do it alone.
    My VISION says Ches "is a NL of boundless opportunity where young people chose to make their future , and we can only realize this vision by working together".
    Didn't the PC Party put us in this mess?

  6. This just seems to be more of the ever growing reality of living in Newfoundland, no planning, no strategy,no accountability and let's shuffle everyone around when this is getting too obvious or retire them on big fat pensions for driving things in the hole...then reelect another bunch of promises to do some more studies......

  7. This comment has been removed by a blog administrator.

  8. It is all well and good to talk about efficiency and the need to get more from our health care dollar but after decades of such talk it is really beyond the point of being tiresome and is not the question we should be asking. The question is not how to make the system more efficient but rather how much health care do we want (answer is always MORE) and how much can we afford (answer is LESS). As a society we do not want to address this so for the past number of decades we have focused on efficiency and hoped we could have it all. How many times have we heard- "These cuts will not affect patient care."

    Every new politician or ruling party comes to the table with the arrogance that there must be a solution and they are going to control health care spending growth. This is somewhat naive to say the least. More than any other sector, the service that the government paid for in the 1950s is not the service that is being paid for today. The current standard for acute care is one patient -one room no more 20 beds wards, in 1950 there was no CT, MRI or PET scanner, radiation treatment, transplants etc were a shadow of where they are today.

    Even efforts to make the system more efficient are not necessarily cheaper. As an example, many procedures that once required multi-night stays are now being done on an outpatient basis. Great except the inpatient beds are still being filled and by sicker (and hence costlier) patients.

    So we look for solutions - how about more privatization as private knows how to do things done for less -right?. If that was the case why isn't the US a paragon of efficiency. It spends twice the amount per patient as Canada and 50% more of its GDP but does a poor job at primary health care for much of its population and heaven forbid you get seriously ill and don't have insurance.

    Cut administration - well the Liberals just did that and again in comparison to the US who spends 25% of its budget on administration, Canada spends half that (just over 12%).

    Close health care facilities- did that in the late 1990s when the Children's rehab and Grace closed and Janeway moved to HSC but it didn't cure budget ills.

    How do we judge? The Nurses Union did a public survey in July 2016 that found
    "84% residents feel there are not enough registered nurses to provide quality care to patients." Yet we have the highest number of nurses per 100,000 population of any province in the country , also the highest number of physicians. How much will ever be enough?
    Bear in mind folks that chasing the Canadian average in civil servants per 100K population translates into over 1000 fewer nurses (to meet the Canadian average of nurses per 100K population) -who wants to put their hand up and vote for that?

    Sorry just feeling a bit curmudgeonly today, there are no easy answers and we need serious and perhaps ,at times, uncomfortable discussions as to how we to fix this but I doubt such discussions will ever happen.

    Poor Richard

  9. Disappointed to see the comment quickly removed (on weather toast bread is causing the power grid peak to ramp up 350 MW).
    It was a technical correct reply and explanation, with a bit of houmour. It goes to the issue of why we have not endorsed DSM (Demand Side Management) here.
    Robert Holmes had mentioned recently (a comment on the last piece) the work of Ecology Action.
    In Nova Scotia they started in 1971, and by 2007 adopted DSM and Efficiency Nova Scotia, which has brought tremendous benefits to homeowner energy reduction.
    While it may be a bit off topic for this latest piece by UG, perhaps we should ask why this is not part of this years budget plan, though being decades behind Nova Scotia. Perhaps the moderator should post the piece on toast important point was being made, I think, as to why we are into the 12 billion boondoggle.

  10. One more day before Black Thursday, April 6, and the Telegram's Russell gripes about MUN not paying his copyright fees. Maybe a fair beef, but even VOCM is talking up the budget impact on their ads. Maybe russell should question a 300 million dollar Core Science bldg at this time of restraint?

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