NDP & UCP cut health spending by $220M over 4 years

Last month, Alberta Health Services prepared an overview on health expenditures in Alberta and uploaded it to YouTube.

Anderson Chuck, senior programme officer in the AHS’s financial planning department created the overview with Erik Geldart and Adam Crowe, also of the same department.

Anderson was the one who presented the overview. He has been with AHS since 2017, and worked at the Edmonton-based not-for profit Institute of Health Economics for 11.5 years before that.

I thought I’d go through the video and present some of the information Anderson shared in it. I’ve also provided the video at the end of this news story.

National health expenditure trends

Here’s the first screen from Anderson’s presentation:

In this screen, Anderson shows us that Alberta spends more per capita on health than Ontario and BC do. The graph in this screen specifically shows the difference between what Alberta spends and what Ontario and BC spends.

The red line near the bottom means that we spend as much per capita as Ontario and BC do. If the black line dips below that, then we spend less per capita—as we did between 1990 and 2001, while Ralph Klein was premier—and we spend more per capita if it’s above the red line. The higher it is above the red line, the more we spend per capita than those two other provinces.

It’s not clear why Anderson chose just those two provinces to compare Alberta to, why he left out the other 7 provinces, or even the national average.

Anderson claimed in his presentation that the expenditures per capita increased rapidly after 2000, but 2000–2001 was only when it passed the red line. It actually started increasing rapidly after 1995–1996.

He also said that it increased rapidly until 2017, but that’s not exactly true. That rapid growth stopped after 2010–2011. It fell the following year, plateaued for 4 years, increased by about $200 per capita over a 3 year period, and finally has been dropping the last 2 years.

He referred to the downturn in 2018–2019 and 2019–2020 as a downward trend, but it’s a bit presumptuous to look at 2 years out of a nearly 40-year span and call it a trend. Granted, the UCP are in power, so it may be a bit prophetic.

National health expenditure gap

Here’s the second screen

In 2019/2020, Alberta’s cost per capita was $809 higher than that of BC and Ontario, but when you exclude persons with severe disabilities, that amount drops by nearly 25% to $614 per capita. BC doesn’t include this demographic when reporting expenditures.

About half of the $809 per person is spent on hospitals ($416), and the next highest is physicians, at $176. Every other category has a difference of less than $100. For example, we spend only $10 more per person on public health than the other two provinces and actually $16 less per person on general administration.

However, AHS isn’t responsible for all that spending. They oversee 96% of hospital spending, 81% of homecare spending, 88% of long-term care spending, and 57% of public health spending. According to the presentation, AHS isn’t accountable for the other expenditures.

In total, AHS is responsible for 61% of total health expenditures in the province.

AHS expenditure trends

This next slide shows AHS expenditures specifically. The graph displays how much AHS’s expenditures grew each year.

What’s interesting is that we clearly see the growth is much lower over the last 5 years—since the year the NDP were elected—than in the previous 5 years. In the last half of this past decade, the average growth rate was 2.5%, compared to the first half, which had an average of 5.7%, more than twice as much.

In just the last 3 years alone, the average change in per capita spending by AHS was -0.2%. And according to the presentation, when adjusting for inflation, that drops further to -1.7%. I’m curious how accounting for population growth affects that amount.

In the most recent year of this recording period, AHS reduced spending in 3 of the 4 main areas I mentioned earlier: hospitals (-2.1%), homecare (-2%), and public health (-1.3%). They did increase spending in long-term care, however—by 2.3%.

Cost drivers: demographic

This screen shows two main points: Alberta’s population will continue to grow over time, and having a relatively younger population brings its own health issues.

For example, Alberta has higher per capita volumes of pregnancy and childbirth, as well as trauma, injury, and poisoning. In fact, we’ve had the highest per 1,000 birth rate in the nation over the last decade. And higher per capita volumes of health-related events will lead to higher per-capita spending on those events.

Cost drivers: contracts, mandate, and capacity

This screen shows some of the cost pressures AHS faces during the 2021–2022 fiscal year. For example, union cost-of-living and benefit increases that AHS had agreed to tally up to $130 million. Addressing continuing care capacity will cost nearly $120 million, and so on.

Plus, it highlights potential cost measures that are possible but haven’t been calculated, such as responding to COVID-19, which is still very much variable; future collective bargaining agreements, considering that several agreements expired last year and have yet to be renegotiated; and building new health facilities, a side effect of the average 1.6% population growth rate shown earlier.

Cost drivers: efficiency

This screen shows that it’s not just higher wages driving higher health spending. I mean, it’s true that wages are higher than in Ontario and BC—7% higher, in fact—but there are other reasons, too.

Our hours of care per service are 17% higher. Our volumes of inpatient services are 9% higher. Our proportion of small hospitals per capita is 85% higher.

We have 17% more higher acute care beds and 68% more teaching beds per capita.We have 7% more family doctors, 8% more specialists, 14% more RNs, and 7% more LPNs per capita. We also spend 57% more on fee-for-service per capita.

Realities

Regarding expenses, according to this slide, AHS has limited control on where it can spend. For example, of the $809 per capita difference in health spending mentioned earlier, AHS is associated with only 61%. As well, it is limited on how much it can control population growth, capacity, and even contract pressures.

On that note, there are 3 drivers that have the largest impact on efficiency: wages, volumes, and hours per case.

92% of AHS employees are unionized, which ties AHS to contractual spending. Volumes in inpatient services and teaching hospitals are driven by the greater number of acute care beds, small hospitals, and teaching hospitals, compared to BC and Ontario. Finally, a higher number of nursing staff affects the hours per case.

Of those, AHS has the ability to affect the latter two: hours per case and acute care volumes, but even those depend government direction, such as an attrition-only police with operational best practices.

According to this slide, another thing to remember is that clinical care makes up only 20% of the factors that influence health outcomes (longevity and life quality). The other 80% of factors are physical environment (10%), social and economic (40%), and personal behaviour (30%).

Strategies and opportunities

Here’s where it gets interesting. This screen provides various tactics AHS can employ to mitigate cost pressure from the 3 largest areas I mentioned earlier.

This screen also shows, through the graph on the right, that ever since 2016–2017, when the NDP introduced operational best practices, AHS has reduced spending—or as AHS calls it, increased efficiency—at the 16 largest sites by about $220 million.

In the first year, they reduced spending by $2 million, followed by 2 years of $88 million each. In the first year the UCP were in power, that “efficiency” dropped in half, to only $42 million.

Watch the entire presentation below.