OECD Recommends Canadian Policy Makers Consider Health Reforms to Cut Cost
Canada’s policy makers should consider reforming the country’s universal health care system by allowing patient charges and private insurance for core services in a bid to improve access and contain public costs, the Organization for Economic Cooperation and Development said.
Canada will need to halve the growth rate of public health spending from the current annual pace of 8 percent in order to keep government finances sustainable as the population ages, the Paris-based agency said in its bi-annual report on Canada.
“In the longer run the soundness of Canada’s public finances will likely be largely determined by the decisions taken regarding the health-care system,” the agency said in a report released today.
At the current pace, spending on health care would almost double as a share of output by 2050 to 13.5 percent, it said. That would make it the second-most expensive system among the Group of Seven nations after Germany.
While Canada’s provinces are responsible for providing health services, the federal government should encourage “a more liberal interpretation” of the country’s national health legislation, which currently prohibits patients paying for insured hospital care and physician services, the OECD said.
Budget Plan
The report, which was drafted in May and revised in July, also recommends that Canada’s federal and provincial governments start withdrawing stimulus as planned by allowing temporary programs to expire, and move ahead with fiscal consolidation in coming years by restraining expenditures.
Peter Jarrett, a senior economist at the OECD, said in an interview with Bloomberg that recommendation probably still holds even with the slowdown in the global recovery seen since the report was written.
“We would recommend sticking to the current plans,” Jarrett said by telephone. “We would argue it would be the role of the monetary authorities” to deal with a further slowdown.
The agency recommends the Bank of Canada return interest rates to more historically normal levels at a “gradual” pace, given the uncertainty around the recovery and the drag coming from falling government spending.
The OECD endorsed in its report the federal government’s March fiscal plan, saying its spending growth targets should eliminate the deficit by 2014 with “high probability.”
Canada’s governing Conservatives have pledged to balance the budget by controlling spending for defense, international aid and public administration.
To contact the reporter on this story: Theophilos Argitis in Ottawa at targitis@bloomberg.net.
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