Week 3 - Fiscal Sustainability of Ontario's Health Care System


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  • - Less than 1% of health care budget goes towards health promotion- $30M
  • Week 3 - Fiscal Sustainability of Ontario's Health Care System

    1. 1. The Fiscal Sustainabilityof Ontario’s Health Care HLTH 405 / Canadian Health Policy Winter 2012 School of Kinesiology and Health Studies Course Instructor: Alex Mayer, MPA
    2. 2. Announcement• There are still a dozen people or so who have not registered their iClickers on the iClicker website. You must do this if you would like to receive your grades on a weekly basis via Moodle. o When registering, use your Queens email as your ‘student ID’
    3. 3. In the News• ‚Premiers’ working group a hopeful sign‛ - The Guardian (Jan 21)• ‚Prevention gets left out of health-care debate‛ – The Toronto Star (Jan 20)• ‚The Harper government is taking action to improve efficiency in health care‛ - press release, Canadian Newswire (Jan 20)
    4. 4. The Fiscal Sustainabilityof Ontario’s Health Care
    5. 5. Topics for today’s lecture:• How much does Ontario spend on health care?• Components of health spending• Key drivers of spending growth• What action has been taken so far… And where work remains to be done.• Don Drummond’s recommendations
    6. 6. What is the Fiscal Sustainability Problem?Every year, Ontarians pay taxes on incomeearned…
    7. 7. What is the Fiscal Sustainability Problem?… on goods and services purchased…
    8. 8. What is the Fiscal Sustainability Problem?… on properties we own… etc.
    9. 9. What is the Fiscal Sustainability Problem?• All other things being equal, this tax revenue rises or falls in tandem with the province’s economic activity (GDP). Year Real GDP Revenue growth 2011 $71.3B 2010 +2.95% $64.9B 2009 -3.26% $68.9B 2008 -0.64%
    10. 10. What is the Fiscal Sustainability Problem?So the ‘fiscal sustainability problem’ is simply this: Y/Y% growth HC spending > Y/Y% growth revenueOr similarly… Y/Y% growth HC spending > Y/Y% growth GDP
    11. 11. Share of Ontario’sTotal Program Spending 2010 Health, 46% Education & Other, 54%
    12. 12. Share of Ontario’sTotal Program Spending 2020 Education & Other, 40% Health, 60%
    13. 13. Share of Ontario’sTotal Program Spending Education & 2030 Other, 20% Health, 80%
    14. 14. So how does one bend the cost curve?
    15. 15. Follow the money
    16. 16. Follow the moneyBig revelation #1:• About 1/3 of the health care budget goes to hospitals. o Until 2011, MoH sent global funding envelopes ($$$) o Then, ‘Excellent Care for All’ kicks in
    17. 17. Global FundingHospital is paid based on historical budget trends, withsmall year-to-year adjustments based on input costs.Pros• Provides budgetary predictabilityCons• Disincentives for discharging patients to post-acute care and increasing volume (i.e. exchanging relatively less expensive patients for relatively more expensive patients)• No incentive to improve quality or efficiency
    18. 18. Excellent Care for All Act (2011) • Introduces activity-based hospital funding in Ontario as of April 2011. • Reimbursement rate based on types, volumes and quality of care provided. • CEO pay is tied to performance (meeting concrete targets). • If all goes well, model will become funding model for CCACs, long-term care homes, CHCs, as well.
    19. 19. Activity-Based FundingPros• Rewards volume, quality and efficiency, which will incentivize greater specialization (i.e. centres of excellence) and high throughput (i.e. more efficient discharge; no more stranded ALC patients).• CEO incentives are aligned with hospital’s performance.Cons• Rural hospitals risk may be penalized if performance standards (e.g. ‘quality premiums’) are set too high or if some component of basic global funding is not retained to offset operating costs.
    20. 20. Follow the moneyBig revelation #2:• More than ½ of health care spending involves paying people for services (e.g. medical, admin, clerical). o Big ticket items: Physicians, nurses, CEOs
    21. 21. Physician Remuneration• Payment models come in many different shapes and sizes: o Fee-For-Service o Blended Models: FHT MDs can choose from Blended Capitation (FHN or FHO) or Blended Salary• Average payments to physicians have moved from $200,000 to $400,000 over 1992 - 2009.
    22. 22. Physician Remuneration• MDs are being gradually weaned off of Fee-for-Service based models through $$$ inducements from other payment models (FHGs in 2003, FHOs/FHTs in 2006).
    23. 23. Blended Capitation Model• Base funding of about $125 (avg.) per patient added to a physician’s roster (accounts for 60% of income) o teen male = $60; 90-year old female = $440 o $60 extra if patient has diabetes or serious mental illness, $125 extra if patient has experienced heart failure• Shadow billing provides small FFS component (only 10-15% of normal OHIP fee for the procedure)• Population health bonuses and incentives: o E.g. If 50% patients get colorectal cancer screening, $2200 bonus If 70% patients get colorectal cancer screening, $4400 bonus
    24. 24. FHTs and Blended Capitation PaymentsPros• Incentivizes cost-effective primary care (i.e. prevention)• Does NOT incentivize volume (desirable for quality care)• MDs lose out on bonuses if low acuity patients seek ER care; this incentivizes 24/7 access to primary care (e.g. extended hours, THAS)Cons• Rewards beneficial activity but not health outcomes!! (yet!)• FFS MD practices still alive and kicking despite their obvious drawbacks (BC payment model not imposed across the board)
    25. 25. Health Human Resources• If you were to design the system from the ground-up, with MDs costing $250k to $500k, how would you organize different health professionals to provide accessible, cost-effective care that emphasizes prevention above all?
    26. 26. Follow the moneyBig revelation #3:• Drug expenditures account for 10% of public health care costs and 33% of privately-borne health care costs.
    27. 27. Pharmaceutical Drugs• Ontario had some of the highest per capita drug costs of any jurisdiction in the world until recently.• Due to: 1. Generous Ontario Drug Benefit program e.g. No matter if a 68-year old made $45,000/yr. or $45M/ yr., she would still have access to basically ‚free‛pharmaceutical drugs (small annual deductible of $100). 2. Overutilization of new, expensive brand-name drugs 90-95% of new drugs provide no clinical benefit over generics. 3. Relatively high prices for generic drugs Highest of any jurisdiction in the world, until recently.
    28. 28. Pharmaceutical Drugs• Defeats cost-effective provision of health care in a few ways: o Age criterion does not align provision of benefits with financial need o High cost of pharmaceuticals facing non-ODB patient leads to high rates of clinical non-adherence; patients show up sicker downstream
    29. 29. Pharmaceutical Drugs• In 2010, new regulations were introduced into the Ontario Drug Benefit Act. o Prices for generics bought under the plan would be capped at 25% of the cost of their brand-name equivalent, down from 50%. o Similar price reductions for drugs purchased out-of-pocket or through private insurance to be phased in over 3 years.Result:• Whereas ODB program cost growth used to go up by 9.4% per year, it only went up by 5% in 2010.
    30. 30. Class Exercise:Don Drummond’s 10 Prescriptions for Sustainable Health Care
    31. 31. Recap • How much does Ontario spend on health care? • Components of health spending • Key drivers of spending growth • What action has been taken so far… And where work remains to be done. • Don Drummond’s recommendationsFill-In-The-Blank…• What is the %growth in Ontario’s HC spending for 2011?• What does this say about our odds of having a fiscally sustainable health care system under McGuinty?