in some hospitals to that of community health clinics, offering a wider range of services. "What was formerly seen as an abuse of emergency facilities may, in fact, be simply a more efficient use of existing expensive facilities at a relatively lower marginal cost." The committee endorsed the increased use of non-physician manpower to reduce future costs without affecting the level of care. This is
especially pertinent with older pa- reached no consensus on the ticklish tients. The health ministry's freeze issue of premiums, which last year on immigration and medical school accounted for about 25% of the enrolment could be maintained by health-care budget in Ontario. substituting paramedical personnel The Progressive Conservative Party trained in gerontology and other re- continues to opt for the premium lated disciplines. system. The Liberal Party and the The select committee was formed New Democratic Party both support following opposition party reaction the abolition of the present OHIP to the government's 37.5% increase system, favouring instead a switch in OHIP fees, subsequently reduced to payment through personal income to 18.25%. However, the members tax.E
How social health insurance should be financed C. KAPSALIS, PH D P. MANGA, PH D A top priority of the health insurance system should be to use equitable, administratively simple means of financing. In that respect, income taxes are the best option. Income taxes are by far the best method of financing health insurance. They are the most progressive (that is, favourable to low-income people) type of taxation. Besides, collection of an income surtax to finance health insurance involves no additional administrative cost. By comparison, health premiums are the least attractive source of revenue. Premiums impose a disproportional burden on low-income people. Although the poor are exempted, the near-poor pay as much in premiums See also Ottawa File, page 1331
as the rich. Premiums are not only regressive but also, at the admission of the Ontario Ministry of Health, costly to administer. Finally, premiums have no impact on patients' use of health services. It cannot even be claimed that they inculcate an awareness of the costliness of health care. The issue of health insurance financing became topical following the attempt of the Ontario Government to raise health premiums. Ontario is one of the three provinces left with a premium system - the other two being Alberta and British Columbia. Health premiums in Ontario in the past have covered about a fifth of Dr. Kapsalis is an economist with the Economic Council of Canada; Dr. Manga is a national health research scholar at the department of health administration, University of Ottawa.
the insured health costs, a much higher fraction than in the other two provinces. The opposition parties reacted to the government initiative by attacking health premiums as a regressive form of taxation. As a result premiums were raised by only half of the proposed amount. Simultaneously, an eight-member committee was set up to evaluate the issue and suggest alternatives. Income taxes best
Income taxes are not only superior to premiums but also to other types of taxation, such as payroll taxes or corporation income taxes. Payroll taxes tend to be reflected in lower wages, higher prices or both, and thus are passed on to the public. As a result, the ultimate burden of a payroll tax may well be less progressive than the burden of an income tax. Corporation income taxes too may be less progressive than personal income taxes. Furthermore, there may be some legitimacy in the contention of a number of economists that an increase in corporation income taxes would adversely affect corporate investment. Instead of income taxes some have favoured graduated premiums (that is, higher premiums for the higherincome classes). However, a system of graduated premiums is only superficially attractive. It is after all a crude form of income tax. Graduated premiums are difficult to administer and require annual adjustments. In Ontario, for example, a form of graduated premium applies to the
low income groups - those with taxable incomes less than $4000 in the case of single persons and less than $5000 in the case of families. However, a very high percentage of the eligible population does not apply for premium exemption. The Ontario government appears hesitant to replace premiums with income taxes as it fears this would be an unpopular measure. This hesitation, however, assumes a tax illusion on the part of the public, since the additional income tax will simply replace an equal amount of premium for the average taxpayer. To replace $1.2 billion of health premiums in Ontario in 1978 would have required a tax increase of approximately 3 percentage points. (Estimated aggregate taxable income in Ontario in 1978 was $37 billion.) The main attraction to a government of an income tax is that its revenue increases automatically with income. Therefore, in the long run an income tax is politically less painful than premiums which require periodic adjustments. Use of income tax to finance health care would have an additional advantage in Ontario: the elderly who can afford it would pay. Under the present system, the entire population aged 65 and over, regardless of financial means, is exempted from premiums. Despite the apparent inequity, it was felt that it is administratively expensive and politically unattractive to limit the premium exemption to the low-income aged only. To many observers, the fundamental issue of social health insurance is cost containment. There seems to be
GMA JOURNAL/DECEMBER 9, 1978/VOL. 119 1335
a widespread view that unless we pay directly for a service it will be abused. There is some support for introducing a fee per visit to a doctor or a hospital. In addition to providing a source of revenue, it is believed this could deter unnecessary use of health services. Deterrent fees have been supported, among others, by the president of the Canadian Medical Association. Deterrent fees, however, should be rejected as inequitable. The experience of Saskatchewan with deterrent fees has demonstrated that the poor are the ones most likely to be deterred. Deterrent fees also tend to place the onus of determining whether or not one is sick on the patient. Deterrent fees or not, in most cases the need for a health service is in fact determined by the doctor. It
would be foolish for someone to go against the advice of his doctor. It would be equally unwise for the health system to create incentives for people to ignore their doctors' advice. Need for cost containment? Health expenditure as a share of Canada's gross national product has stabilized in recent years (to about 7%). By international standards, Canada's level of health expenditure is not unusual. According to figures of the Organization for Economic Cooperation and Development, Canada's share is equal to the average for all OECD countries. On the other hand, there are good reasons for not being too complacent about the stabilization of health spending: * Favourable demographic conditions - low birth rate and low
number of aged - have helped keep our health bill low for the time being. * The wage and price controls of the last few years have contributed in keeping down the rise in wage costs of this highly labour-intensive industry. * Ontario has used rather severe cost cuts - hospital closures, hospital bed reductions and constraints on hospital budgets and doctors' fees. In conclusion, the situation with health spending is far from being critical at the present. However, if the need is felt to contain health spending, there are better alternatives to deterrent fees. The Ontario Economic Council, for example, has suggested that part of the cost of health services be considered as taxable income. Such a scheme, while acting as a deterrent, does not burden the poor. U
Canadians for Health Research organization faltering despite star*studded annual meeting program KARIN MOSER
By anyone's standards, the second national conference of Canadians for Health Research should have been a brilliant success. Buoyed by an attendance of 300 during its 2-day debut last year, the fledgling organization promptly enlisted a series of speakers designed to make this year's program read like ar. international Who's Who. Dr. Albert Sabin, developer of the oral, live polio vaccine, would titillate the audience with his theories on the challenges of influenza. Marjorie Guthrie, founder and president emeritus of the Committee to Combat Huntington's Chorea, would discuss encouraging results from a team approach coupled with more effective medications in the treatment of a disease for which in earlier days victims were burned at the stake both in Europe and in the peaceful states of New England. Federal Health Minister Monique B6gin with any luck might make an announcement about long-awaited increased funding for research. The nature and contents of her address were shrouded in mystery until the very last moment (and with good reason, it turned out). Dr. S. William Gunn, representing
the World Health Organization, would illustrate in unmistakable terms the urgent need for health research in an interdependent world. The list went on. Alas, last month's 2-day meeting in Ottawa was a dismal, perhaps even tragic, failure - tragic in that the paltry attendance reflected not a lack of interest, but rather a growing despair about whether there was really anything anyone could do to improve support for medical research in Canada. "Everyone is just giving up," noted Dr. Gail Rock, medical director of the national blood transfusion service of the Red Cross, as she glanced around the near-empty conference room. Several other scientists echoed her observation. Fewer than 50 people, including speakers, conference organizers and media representatives, were present. While CHR officials placed the actual registration at just under 100 (one-third the number who attended last year's meeting), not one speaker managed to draw more than 50 or 60 delegates. True, the CHR meeting was competing with a conference in Toronto while in the nation's capital repre-
1338 CMA JOURNAL/DECEMBER 9, 1978/VOL. 119
sentatives of SCITEC (the Association of the Scientific, Engineering and Technological Community of Canada) were gearing up for a full week of science and technology displays and lectures to increase public awareness. But one researcher summed up that rationalization neatly: "Let's face it. If all those other things weren't going on right now we would have at least six more bodies here." Perhaps some of those who chose to stay away knew instinctively that the federal government wasn't about to offer any monetary surprise gift packages, no matter how richly deserved, either now or in the immediate future. Those who did attend, however, did not expect to hear what the health minister herself labelled a "pedestrian and trivial" speech, which consisted at its worst largely of a rambling dissertation about how the government had arrived at its budget cuts and at its best by an assurance to the scientific community that medical research would not be "put on the back burner until our other economic difficulties go away." While B6gin apologized for disappointing her audience by not an-
especially pertinent with older pa- reached no consensus on the ticklish tients. The health ministry's freeze issue of premiums, which last year on immigration and medical school accounted for about 25% of the enrolment could be maintained by health-care budget in Ontario. substituting paramedical personnel The Progressive Conservative Party trained in gerontology and other re- continues to opt for the premium lated disciplines. system. The Liberal Party and the The select committee was formed New Democratic Party both support following opposition party reaction the abolition of the present OHIP to the government's 37.5% increase system, favouring instead a switch in OHIP fees, subsequently reduced to payment through personal income to 18.25%. However, the members tax.E
How social health insurance should be financed C. KAPSALIS, PH D P. MANGA, PH D A top priority of the health insurance system should be to use equitable, administratively simple means of financing. In that respect, income taxes are the best option. Income taxes are by far the best method of financing health insurance. They are the most progressive (that is, favourable to low-income people) type of taxation. Besides, collection of an income surtax to finance health insurance involves no additional administrative cost. By comparison, health premiums are the least attractive source of revenue. Premiums impose a disproportional burden on low-income people. Although the poor are exempted, the near-poor pay as much in premiums See also Ottawa File, page 1331
as the rich. Premiums are not only regressive but also, at the admission of the Ontario Ministry of Health, costly to administer. Finally, premiums have no impact on patients' use of health services. It cannot even be claimed that they inculcate an awareness of the costliness of health care. The issue of health insurance financing became topical following the attempt of the Ontario Government to raise health premiums. Ontario is one of the three provinces left with a premium system - the other two being Alberta and British Columbia. Health premiums in Ontario in the past have covered about a fifth of Dr. Kapsalis is an economist with the Economic Council of Canada; Dr. Manga is a national health research scholar at the department of health administration, University of Ottawa.
the insured health costs, a much higher fraction than in the other two provinces. The opposition parties reacted to the government initiative by attacking health premiums as a regressive form of taxation. As a result premiums were raised by only half of the proposed amount. Simultaneously, an eight-member committee was set up to evaluate the issue and suggest alternatives. Income taxes best
Income taxes are not only superior to premiums but also to other types of taxation, such as payroll taxes or corporation income taxes. Payroll taxes tend to be reflected in lower wages, higher prices or both, and thus are passed on to the public. As a result, the ultimate burden of a payroll tax may well be less progressive than the burden of an income tax. Corporation income taxes too may be less progressive than personal income taxes. Furthermore, there may be some legitimacy in the contention of a number of economists that an increase in corporation income taxes would adversely affect corporate investment. Instead of income taxes some have favoured graduated premiums (that is, higher premiums for the higherincome classes). However, a system of graduated premiums is only superficially attractive. It is after all a crude form of income tax. Graduated premiums are difficult to administer and require annual adjustments. In Ontario, for example, a form of graduated premium applies to the
low income groups - those with taxable incomes less than $4000 in the case of single persons and less than $5000 in the case of families. However, a very high percentage of the eligible population does not apply for premium exemption. The Ontario government appears hesitant to replace premiums with income taxes as it fears this would be an unpopular measure. This hesitation, however, assumes a tax illusion on the part of the public, since the additional income tax will simply replace an equal amount of premium for the average taxpayer. To replace $1.2 billion of health premiums in Ontario in 1978 would have required a tax increase of approximately 3 percentage points. (Estimated aggregate taxable income in Ontario in 1978 was $37 billion.) The main attraction to a government of an income tax is that its revenue increases automatically with income. Therefore, in the long run an income tax is politically less painful than premiums which require periodic adjustments. Use of income tax to finance health care would have an additional advantage in Ontario: the elderly who can afford it would pay. Under the present system, the entire population aged 65 and over, regardless of financial means, is exempted from premiums. Despite the apparent inequity, it was felt that it is administratively expensive and politically unattractive to limit the premium exemption to the low-income aged only. To many observers, the fundamental issue of social health insurance is cost containment. There seems to be
GMA JOURNAL/DECEMBER 9, 1978/VOL. 119 1335
a widespread view that unless we pay directly for a service it will be abused. There is some support for introducing a fee per visit to a doctor or a hospital. In addition to providing a source of revenue, it is believed this could deter unnecessary use of health services. Deterrent fees have been supported, among others, by the president of the Canadian Medical Association. Deterrent fees, however, should be rejected as inequitable. The experience of Saskatchewan with deterrent fees has demonstrated that the poor are the ones most likely to be deterred. Deterrent fees also tend to place the onus of determining whether or not one is sick on the patient. Deterrent fees or not, in most cases the need for a health service is in fact determined by the doctor. It
would be foolish for someone to go against the advice of his doctor. It would be equally unwise for the health system to create incentives for people to ignore their doctors' advice. Need for cost containment? Health expenditure as a share of Canada's gross national product has stabilized in recent years (to about 7%). By international standards, Canada's level of health expenditure is not unusual. According to figures of the Organization for Economic Cooperation and Development, Canada's share is equal to the average for all OECD countries. On the other hand, there are good reasons for not being too complacent about the stabilization of health spending: * Favourable demographic conditions - low birth rate and low
number of aged - have helped keep our health bill low for the time being. * The wage and price controls of the last few years have contributed in keeping down the rise in wage costs of this highly labour-intensive industry. * Ontario has used rather severe cost cuts - hospital closures, hospital bed reductions and constraints on hospital budgets and doctors' fees. In conclusion, the situation with health spending is far from being critical at the present. However, if the need is felt to contain health spending, there are better alternatives to deterrent fees. The Ontario Economic Council, for example, has suggested that part of the cost of health services be considered as taxable income. Such a scheme, while acting as a deterrent, does not burden the poor. U
Canadians for Health Research organization faltering despite star*studded annual meeting program KARIN MOSER
By anyone's standards, the second national conference of Canadians for Health Research should have been a brilliant success. Buoyed by an attendance of 300 during its 2-day debut last year, the fledgling organization promptly enlisted a series of speakers designed to make this year's program read like ar. international Who's Who. Dr. Albert Sabin, developer of the oral, live polio vaccine, would titillate the audience with his theories on the challenges of influenza. Marjorie Guthrie, founder and president emeritus of the Committee to Combat Huntington's Chorea, would discuss encouraging results from a team approach coupled with more effective medications in the treatment of a disease for which in earlier days victims were burned at the stake both in Europe and in the peaceful states of New England. Federal Health Minister Monique B6gin with any luck might make an announcement about long-awaited increased funding for research. The nature and contents of her address were shrouded in mystery until the very last moment (and with good reason, it turned out). Dr. S. William Gunn, representing
the World Health Organization, would illustrate in unmistakable terms the urgent need for health research in an interdependent world. The list went on. Alas, last month's 2-day meeting in Ottawa was a dismal, perhaps even tragic, failure - tragic in that the paltry attendance reflected not a lack of interest, but rather a growing despair about whether there was really anything anyone could do to improve support for medical research in Canada. "Everyone is just giving up," noted Dr. Gail Rock, medical director of the national blood transfusion service of the Red Cross, as she glanced around the near-empty conference room. Several other scientists echoed her observation. Fewer than 50 people, including speakers, conference organizers and media representatives, were present. While CHR officials placed the actual registration at just under 100 (one-third the number who attended last year's meeting), not one speaker managed to draw more than 50 or 60 delegates. True, the CHR meeting was competing with a conference in Toronto while in the nation's capital repre-
1338 CMA JOURNAL/DECEMBER 9, 1978/VOL. 119
sentatives of SCITEC (the Association of the Scientific, Engineering and Technological Community of Canada) were gearing up for a full week of science and technology displays and lectures to increase public awareness. But one researcher summed up that rationalization neatly: "Let's face it. If all those other things weren't going on right now we would have at least six more bodies here." Perhaps some of those who chose to stay away knew instinctively that the federal government wasn't about to offer any monetary surprise gift packages, no matter how richly deserved, either now or in the immediate future. Those who did attend, however, did not expect to hear what the health minister herself labelled a "pedestrian and trivial" speech, which consisted at its worst largely of a rambling dissertation about how the government had arrived at its budget cuts and at its best by an assurance to the scientific community that medical research would not be "put on the back burner until our other economic difficulties go away." While B6gin apologized for disappointing her audience by not an-
