Fiscal problems may force a health-care fix: Opinion

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As a rocky year comes to a close, my thoughts wander to events, both good and bad, that I had not expected and what they may mean for the future. There are so many to consider! I picked two themes unique to Canada: deepening Medicare turmoil and the surprising fiscal turnaround in public deficits.

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As the pandemic ends, our Medicare system is clearly a patient on the ventilator. After repeated cost-saving cuts to acute-care beds over the years, the pandemic laid bare the crisis of inadequate capacity in our health system. We have almost reached the point of triage, in which medical staff would have had to decide who should live and who should die. Hats off to our hardworking medical professionals, who got us through very difficult times in 2020 and 2021 by shifting resources from surgeries to COVID care.

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But the real surprise came in 2022 when new stresses emerged: not the longer waiting times for surgeries and other procedures — they were expected — but rather the catastrophe in emergency services across the country. Paramedics sat in their ambulances with their patients as emergency treatment centers were unable to handle so many people showing up at the hospital. With paramedics lined up outside Emerg, waiting times for ambulances increased dramatically.

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Lots of excuses are given for this crisis. Because too many people don’t have doctors the surge in respiratory cases forced them to go to hospitals. Because overworked doctors and nurses got sick, too, absenteeism rose. Because there are too few clinics, even those that are open in the evening or on weekends get backed up. Because of costs, rural ambulance services are not available 24 hours a day.

If a rose grows out of this mess, it is that Canadians are fed up with their mediocrity health system. That’s now the most important poll issue. Even though Canada is one of the world’s biggest per capita spenders on our health care system is clearly failing. We have long wait times, widespread service rationing and strikingly poor policy coordination — such as too many hospitals and too few clinics. Canadians may finally quit listening to the defenders of under-performing Medicare and insist on importing the innovative ideas and better management on display in the European countries we should be comparing ourselves to.

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Not everything was bad in 2022, however. A real surprise has been the turnaround in public deficits, especially at the provincial level. Because of the COVID rebound and surging inflation, tax revenues were poured into treasuries. Last spring, the provincial government announced a total of $3 billion in surplus for the 2021-22 fiscal year, the first time they have run a collective surplus since the 2007-8 fiscal year. Not all provinces were in the black — Manitoba, Saskatchewan and Newfoundland & Labrador still had deficits — but it was a remarkable turnaround nonetheless.

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Adding a federal deficit of $114 billion for 2021-22, the consolidated public deficit totaled $111 billion, about four per cent of GDP. With inflation continuing to pump up revenues, public sector deficits are expected to fall further this year — to about $50 billion for the fiscal year that ends this coming March 31st.

None of this was expected. On the contrary, many pundits predicted that with the pandemic over governments would have to raise tax rates to pay back their COVID debts. Predictions of higher taxes were partly correct: we did get some new corporate and soak-the-rich taxes. But most Canadians are paying more tax, not because of higher rates, but because of inflation. At the end of this year, per capita taxes are $5,000 higher than they were at the end of 2019. That’s fully one-fifth more — for a family of four a whopping $20,000 more in taxes in just three years.

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None of this will last, however. Unless federal and provincial governments hold the line on spending, deficits will grow. Indexed government transfers could be pumped up in 2023 by as much as nine per cent to make up for last year’s price escalation. Higher interest rates will start pushing up public debt charges. Interest rate hikes will also slow down the economy, eventually turning job vacancies into unemployment that will require higher government spending and eradicating government revenues. The last two years of unbridled public spending will need to be replaced by fiscal austerity, especially at the federal level.

Not to end on a bad note: Maybe governments are increasingly short of money will be forced to fix health care. We can always hope as we approach the New Year.