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The Progressive Economics Forum

No need for alarm over health care spending in BC

Jeffrey Simpson is right to lament that “there is no realistic, sensible debate” about health care in BC. Unfortunately, his May 13th Globe & Mail column “Even the redoubtable Premier Campbell struggles with health care” does not help. Simpson’s main point in the column is that health care spending in BC is rising out of control, defeating Campbell’s efforts to keep it down. To make this argument, Simpson throws around numbers mainly for their shock value, without accurately representing the whole story of healthcare spending in BC. Consider this:

For the next three years, health-care spending will devour 68 per cent of all new operating expenditures in British Columbia. Is this sustainable, the Premier is asked. “No,” he answers. His Finance Minister, Carole Taylor, asked the same question, answers, “No.”

What else can they say, when at the end of this three-year cycle health care will take 47 per cent of operating spending? What else can any premier say, with health care taking almost half of their governments’ budgets and growing every year at 6 to 8 per cent?

Let’s examine the facts more closely. First of all, the size of health care spending as a portion of newly announced operating expenditures in a budget is irrelevant. It also doesn’t matter how much of the total operating spending goes to health care. These measures fail to account for spending dedicated to more capital-intensive sectors such as transportation, and are directly affected by the particular funding decisions a government makes in any given year. They are also particularly unreliable in BC where, as the CCPA has consistently shown, the government has systematically understated how much surplus room it has (see, for example, figure 1 in last fall’s Submission to the Select Standing Committee on Finance and Government Services here).

Simpson is right that the share of the provincial budget going towards health care has grown from 35% in 2000/02 to 38% in 2004/05, where it remained until 2007/08 (calculations based on the Government’s own Budget 2005, September Update, Table A8). However, this is largely a result of the budgets for social services and environmental programs being dramatically cut in Campbell’s first mandate. When we have the government’s total expenditure actually falling by 0.9% in 2002/03 and 0.2% in 2003/04, even small increases in provincial health care spending will result in a noticeable increase in the share of health care in the total budget (again Budget 2005, September Update, Table A8).

Secondly, the healthcare budget has not been “growing every year at 6 to 8 per cent” for as long as Simpson’s column would suggest. As Marc Lee points out in a previous blog post here, health spending rose by less than 4% per year until 2005/06 (election year) when we saw a more substantial 7.8% increase, followed by a 6.6% increase in 2006/07, and another 7.4% rise in 2007/08. The projected increases over the next 3 years are also not as large as you are led to believe. Health care spending is going to increase by 4.2% in 2008/09 and by 5.6% in each of 2009/10 and 2010/11 (BC Budget and Fiscal Plan 2008, table A8). Concluding that the budget is growing every year at 6 to 8 per cent based on two mid-decade increases of over 7% is a huge overstatement. Especially when we consider that these above-average increases were necessary to compensate for several years when spending growth was insufficient (read: real cuts in services, as Marc Lee estimates that an annual spending growth of just under 5% is needed to provide the same level of health services in the province in this paper).

In the end, what matters for affordability is how healthcare expenditure compares to our total income (or GDP), which captures our capacity to pay, not its share of the provincial budget. BC’s public healthcare spending is projected to remain stable at 7.5% of provincial GDP over the next three years (calculations based on BC Budget and Fiscal Plan, 2008, table A8 for health spending and table A17 for nominal GDP figures). And at this level, health care spending is lower than its all-time high of 8.0% of provincial GDP, which we saw in 2001/02.

So while there certainly is room for improvement in the current system, there is no evidence of alarming overspending on health care in this province (or anywhere in Canada, for that matter).

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Simpson deserves some credit for pointing out that both K-12 and post-secondary education have been getting the short end of the stick from this government despite Campbell’s “great goal” to make BC the best-educated, most literate jurisdiction on the continent. Yes, education needs to be better funded. But education budgets have not been cut to accommodate rising health care costs, as Simpson’s column might imply. Education is not getting the money it deserves because the government has not made it a priority! It’s as simple as that. Consider, for example, the $450 million being spent on the one-time carbon dividend in July (an obvious bribe a year before next election), which is nine times larger than the estimated $50 million funding cut for post-secondary education announced in late March. Clearly, it’s not a lack of cash that’s the problem but a lack of political will to invest in BC’s future.

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