Quebec’s Couillard Plans Health-Care Cuts to Trim Deficit

Quebec expects to save C$220 million ($199 million) by eliminating “hundreds” of administrative jobs in health care to help balance the budget next year, Premier Philippe Couillard said.

“We have a very complex health-care system,” Couillard, 57, said yesterday in an interview at Bloomberg headquarters in New York. “There’s a vast reform that’s going to be announced this week of doing away with most of the bureaucracy in the system, freeing money to be dedicated to the patients.”

Couillard, a neurosurgeon and former health minister, was elected in April as leader of Canada’s second most-populous province after promising to shrink the bureaucracy. He has vowed to plug a C$2.35 billion budget gap in 2015-16 with the help of measures such as spending cuts and a hiring freeze.

Health care is Quebec’s largest expenditure, accounting for about C$37.3 billion, or 43 percent, of the government’s program spending of C$86.6 billion this fiscal year.

Quebec’s health-care spending climbed by an average of 5.6 percent a year in the decade ended in March, budget figures show. With demographic projections showing that the province’s working-age population will start declining in 2017, investors such as Hosen Marjaee of Manulife Asset Management warn that costs could climb even faster.

Since his election, Couillard created two committees to overhaul government programs and the province’s taxation system. He gave the program review committee a mandate to find more than C$3 billion in savings.

“Quebec has long-term demographic issues,” Marjaee, who manages about C$19 billion and owns Quebec bonds, said in a telephone interview from Toronto. “So far, it appears that the government of Mr. Couillard will take the necessary steps to curb the deficit.”

Hospital Boards

The health-care reform will likely entail the elimination of regional bodies that oversee hospitals, the premier said.

“We’re removing a layer of administration,” Couillard said. “We have a ministerial layer, a regional layer and a local layer. We’re essentially going to do away with the regional layer.”

Cutting costs “is difficult,” Douglas Offerman, a senior director at Fitch Ratings in New York, said in a telephone interview. “There are services that people depend on, and it’s always challenging. It’s the turn of the expense side of the budget to provide some savings now.”

Job Losses

Couillard wouldn’t specify how many positions would be eliminated, saying only that the government is “talking about hundreds of jobs. We hope that with attrition we can take care of most of them, but we are ready to use other tools if necessary to achieve the same objective.”

Payroll expenses represent about 60 percent of health-care spending, and “if you don’t attack the number of people, the headcount as you would say in business, you’re not going to save money,” Couillard said.

Quebec’s gross debt amounted to C$198.1 billion as of March 31, and will probably climb to C$217.4 billion by March 2019, budget documents show.

Debt represented 61 percent of gross domestic product as of March, according to a report released Aug. 21 by Toronto-based credit-rating company DBRS Ltd. That’s “by far” the highest among all Canadian provinces, DBRS said.

“Having an unbalanced budget and a debt that is out of control is the best way to kill those programs,” Couillard said. “If we want to protect them and to make them still there for the next generation, we have to balance the budget.”

Day-Care Fees

Quebec is also considering cutbacks in education “with the goal of preserving services” while pondering ways to tie day-care rates to the income of parents, Couillard said. Quebec parents pay C$7 a day for daycare, the lowest rate in North America.

“Everybody would find it normal that at my level of income, I would pay C$10 a day, which is still a very good deal for daycare,” Couillard said.

Fostering growth is another of Couillard’s priorities. The Premier spent two days in New York this week in a bid to attract investment to the province.

As long as “strict” environmental conditions are met, Quebec would likely welcome TransCanada Corp.’s proposed C$12 billion Energy East pipeline to Canada’s Atlantic Coast, Couillard said. Calgary-based TransCanada plans to apply for a permit for Energy East, which would supply crude to the Gulf Coast as well as European and Asian markets.

“As a matter of principle, we don’t object fundamentally to the concept of the TransCanada East pipeline,” Couillard said. “But then you have to look at issues regarding communities, wildlife, environment, which we are going to do. It’s normal that we should do this.”

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