September 13, 2019
My impresson from the MacKinnon Report and Recommendations is that the panel was told to find ways to cut the overall budget, interpreted this in part as an instruction to find ways to justify an already made decision to cut the budget, and decided that recommendations based on comparisons to per capita costs for comparably named programs and services in other provinces would satisfy a political agenda they disagreed with while leading the politicans behind it to destroy themselves.
The panel recommends, for example, that some health services be moved out of the public sector; that physician fees be cut; that school boards be forced to reduce overhead while increasing resource sharing between schools; that post secondary institutions raise tuitions, develop commercialized programming, and/or have their future arbitrarily decided on financial grounds by government; that the government use legislation and fiat rather than good faith negotiation in dealing with its own employees, reduce capital spending, particularly on road and building maintenance, and, impose downward change on funding for Alberta municipalities.
Nearly all of the recommendations in some way echo campaign rhetoric but, if acted on, none would produce long term spending reductions while all would predictably enrage and empower people opposed to the current conservative government.
The panel to the contrary, the question for an Alberta policy maker who believes some program too expensive isn't what a roughly comparable program in some other province may cost, but whether and how to change what we do to lower our costs. Thus inter-provincial cost comparisons may reasonably be adduced to support the argument that Alberta's program spending needs to be reviewed and either justified or changed, but the sleight of logic and omission by which the writers transmogrify the comparisons into targets to be achieved by making budgetary cuts to the program delivery systems in place in Alberta is fundementally inappropriate.
In general, an appropriate review of any government's expenditure on an existing program starts by asking how program delivery evolved to its present state, what its initial and current goals are, whether efforts to meet those goals should continue to be funded, and, if so, how, and to what extent. Once a normative forward looking view of the program and its delivery mechanisms are developed, then recommendations for the structural and budgetary changes needed to bring what exists into line with what should be can sensibly be made.
Since the panel did essentially none of this, my advice to the Kenny government is that they accept but ignore the MacKinnon Report and consider continuing most spending as is, deficit be damned, for the 2019/20 fiscal year; take that time to review the entirety of government programs affecting Health, Education, and Social Services; and decide, after that review, whether to make changes, where and how to make those changes, and whether any major structural change or changes required should be subject to a referendum before proceeding.
The first sections of the report restate the obvious budgetary difficulties, praise civil service abilities to produce economic forecasts, and question the long term viability of Alberta's reliance on resource revenues, All of this, however, seems to be mere background and neither necessary support for, nor obviously considered in the making of, the 26 specific recommendations offered in the report.
The report supports the campaign claim that Alberta has a spending problem rather than a revenue problem by relying heavily on repeated comparisons to seemingly lower per capita costs for services in other provinces (mainly Ontario and B.C.) to argue that Alberta's per capita cost of service is too high, and therefore that Alberta's services budgets should be cut to the levels reported for the least cost provinces.
However, unless I am seriously mistaken all of the provinces whose services to taxpayers are described as better and cheaper than Alberta's have significantly higher taxes, and greater per capita debts, than Alberta and, of course, that wouldn't be possible if they really were providing better services for less.
The key reason for this contradiction is that, with few exceptions, the implied equivalences are questionable; the top line comparisons largely sidestep the issue of why and how Alberta's expenditures may be higher than those of other provinces; and, the entire subject of how the mix of services and taxation at multiple levels of government affect both the budgetary cost and the delivery of these programs is mostly omitted.
Few of these differences show up in the report - it consists mainly of recommendations with some argument and selected data cited in support but offers very little about the consequences of each recommendation; very little about the data context; almost nothing about alternative ways of understanding the data; and very little in the way of system wide analysis. For example, where numbers from research documents provided by KPMG and MNP are quoted to support the argument that some other province delivers a comparable or better service for less money the explanatory footnotes and cautions from the source material are generally omitted.
Thus Table 12, (p.5) of the MacKinnon Report includes this:
Measure of Performance AB BC ON QC Notes Median wait (number of weeks) from referral by GP (General Practitioner) to treatment 26.1 23.1 15.7 15.8 Bacchus Barua and David Jacques, with Antonia Collyer (2018). Waiting Your Turn: Wait Times for Health Care in Canada, 2018 Report. Fraser Institute. Provincial Per Capita Spending on Health Care Total - Age- Gender Standardized $5,312 3,836 3,706 3,643 CIHI data; 2016 calendar year
but KPMG's partially explanatory footnote (KPMG, p. 67) is missing from the MacKinnon Report. Similarly, that same table compares an Alberta per capita cost estimate of $5,077 to Ontario's $4,080 without noting KPMG's caution (KPMG: p.5) that
There are inherent differences in Alberta, British Columbia, Ontario and Quebec's business models for health.
As a result a naive reader could, I imagine, rather easily come to believe that Ontario delivers better health services for 20% less, while Quebec does so for nearly 40% less.
As of about 3PM on Sept 12th, 2019 the MacKinnon report had been downloaded, according to the counter on the government's website 10,310 times - but similar counters for the KPMG and MNP reports including the (somewhat) explanatory texts and (some) interpretive cautions showed only 844 and 524 downloads respectively. In other words, we can reasonably assume that less than 10% of MacKinnon Report readers had access to the interpretive information and therefore that around 90% of readers were either insiders who understood the meaning of these terms, people who mostly ignored the numbers, or people who took these numbers at face value.
For the most part discussion of top line budget cuts for existing and continuing programs silently assumes that the effects of such cuts are uniformly distributed across affected programs - in other words that all of those affected feel a strictly proportional impact of any budget cut or staffing directive. In reality, that doesn't usually happen in complex organizations and no recommendations on budget cutting can be both actionable and sensible without serious apriori consideration of the distribution and impacts of the proposed cuts.
In addition, the panel does not substantively address a particularly subtle and difficult issue of some significance here: that how government does accounting affects its apparent cash and debt positions. In general, for example, the near total separation of operating and capital expenses distorts everything government accounts for while the categorization of expense by disbursing authority further complicates the picture. In its discussion of health care costs, for example, the panel ignores WCB health care costs, depreciation, and new capital cost to cite a per capita cost estimate of $5,077 for 2019 (which I assume means fiscal 2018/19) where a full accounting of all government mandated health care costs to Albertans would probably produce an estimate well in excess of $6,000 per capita.
The Healthcare Recommendations
The report offers a nominal 26 recommendations most of which show similar characteristics and are correspondingly subject to similar responses - however, only the four healthcare recommendations are discussed here. These are:
Recommendation 1:Empower strong, strategic leadership to transform the current health system, using other provinces as models, and engaging nurses, doctors, other health professionals, stakeholders and the public where appropriate. The goal is to establish a health system that achieves better outcomes, provides more appropriate care for Albertans, and approximates the average per capita spending of British Columbia, Ontario and Quebec.
On the surface this states a goal (better outcomes for less) and tells the minister how to achieve it ("Empower strong, strategic leadership to transform"). In reality, however, the minister has been appointed by the Premier and the voters to provide that leadership, the recommendation assumes Alberta health care needs transformation, and silently assumes the case for using other provinces as models for successful health care delivery. Thus the pablum about leadership, engagement, transformation, and the appropriateness of care is just part of the sales pitch for the actual recommendation: that the minister accept the idea that the cost and performance levels reported for Ontario, B.C. and Quebec be used as target levels for cost and performance in Alberta.
Since this idea forms the basis for most of the report it isn't actually a recommendation at all: it's a justification for the report - thus, a cynic could easily extend the KMPG note:
There are inherent differences in Alberta, British Columbia, Ontario and Quebec's business models for health.
and the detailed "business model" comparisions given later in the report to cover and largely invalidate all of the inter-provincial comparisons, and so most of the recommendations, in the report.
Recommendation 2:Establish the following set of outcomes to measure Alberta's progress in transforming its health system to reflect the needs of 21st century patients and reduce costs. An external organization, independent of government, should review and report annually on Alberta's progress in closing the gap with comparator provinces on these outcomes.
|Measure of Performance||AB||BC||ON||QC||Notes|
|Provincial Per Capita Spending on Health Care|
|Total - Nominal||$5,077||4,267||4,080||4,370||CIHI Data 2018-19 forecast|
|Total - Age- Gender Standardized||$5,312||3,836||3,706||3,643||CIHI data; 2016 calendar year|
|APP (Alternative Payment Plans) payments||13%||20%||36%||20%||CIHI data; National Physician Database 2016-2017|
|Patients readmitted to hospital||9%||9.7%||9.2%||8.9%||CIHI data; 2017-2018|
|Percentage of care in hospitals that could be provided in a more appropriate care setting (% of hospitalization days)||18.3%||13.0%||14.6%||N/A||CIHI data; Number of hospitalizations and alternate level of care (ALC) cases, and length of stay (LOS) days, by province/ territory, HMDB/OMHRS, 2017–2018|
|Median number of days hospital stay extended until home care services or supports ready||11||7||7||N/A||CIHI data; 2017-2018|
|Ambulatory Care Sensitive Condition Hospitalization Rates, per 100,000||338||294||314||332||CIHI data; 2017-2018|
|Cost of a Standard Hospital Stay||$7,983||6,539||5,460||5,839||CIHI data; 2017-2018|
|Percentage with access to a regular health care provider||83.7%||82.2%||90.3%||79.4%||Statistics Canada Table 13-10-0096-01; Health characteristics, annual estimates, 2018|
|Percentage of LPNs (Licensed Practical Nurses relative to RNs (Registered Nurses)||38%||40%||47%||39%||CIHI data; 2018; per 100,000 population|
|Percentage of (Nurse Practitioners) NPs relative to Family Medicine Physicians||9%||7%||19%||4%||Derived from CIHI and Scott’s Medical Database data; 2017|
|Percentage of facility based beds in a community setting||78%||N/A||N/A||N/A||AHS annual report, 2017-18|
|Median wait (number of weeks) from referral by GP (General Practitioner) to treatment||26.1||23.1||15.7||15.8||Bacchus Barua and David Jacques, with Antonia Collyer (2018). Waiting Your Turn: Wait Times for Health Care in Canada, 2018 Report. Fraser Institute.
|Note: Footnotes omitted, formatting changed)|
At the same time that this recommendation silently transforms numbers from an external organization (The CIHI) of the type it suggests should review the numbers into performance targets, it also embeds both undefined distinctions and silent assumptions that might easily be considered contradictory: are the needs of 21st century patients really so different from 20th century patients that those needs can be met for less?
The original table contains a reference to the Fraser Institute's long running annual report on health care wait times with a footnote I see as reflecting the writer's unconscious commitment to left wing positions (and poor grammar):
"As this measure is from third-party source it may not be a reliable measure for the AH / AHS due to limitations in the frequency of its measurement (i.e. based on a survey administered by the third-party)
Notice that, to this writer, the CIHI and Statistics Canada are not third party agencies with respect to either AHS or the Alberta Government - but the non governmental Fraser Institute is.
Recommendation 3:Make greater use of alternative service delivery for day procedures and other services that do not have to be delivered in hospitals and could be delivered in private or not-for-profit facilities. The use of alternative service delivery should be applied to other areas beyond health.
This third recommendation is effectively an exploding cigar: nibbling a bit at the edges of the public monopoly will not have any appreciable effect on the total budget (less than one tenth of one percent), but will immediately expose the government to continuous and exaggerated ideological attack from those who are committed to opposing any move to reduce public sector control of health care, education, and social support.
Recommendation 4:Limit the increasing cost of physician services by providing incentives for physicians to move to Alternative Payment Plans and by renegotiating the agreement with the Alberta Medical Association. Every effort should be made to achieve a negotiated agreement, but the government should also consider its legislative options.
This is another political land mine because forcing doctors to accept less for their services will have immediate political consequences greatly empowering the government's ideological adversaries but is a classic case of being penny wise in the short term and pound foolish in the longer term.
Reducing the number of minutes a physician can afford to devote to the average patient fairly quickly leads to increases in budgetary costs because:
- many of the better, more experienced, practitioners will retire or move to the United States where their skills will be better recognized and their lives considerably less stressed - while their replacements, although perhaps cheaper initially, will make more mistakes and thus drive longer terms costs up and service quality down.
- the majority of front line people, (particularly doctors, surgeons, and registered nurses) will, of course, stay - but most are already stressed close to their limits and most will try to alleviate new stresses by adapting work practices to the new conditions.
In particular, these people already face time consuming reporting requirements and organizational barriers to professional excellence that they try to work around to serve their patients as best they can - and these work arounds reduce the average quality of service in the short term and thus health care costs in the long term. Reductions in the fee for service schedule will, for example, motivate practitioners to reduce the time spent with patients whose problems are either not apparent or not understood because doing so frees up minutes that can be spent on people who can be helped - but it is generally the patients who initially present with ambiguous or easily dismissed symptoms who end up incurring disproportionate health care costs.
- ultimately it is not the minister's job to reduce health care costs, the job is to deliver effective health care at a cost the taxpayer can sustain. However, not all costs are measured in dollars and directly attributable to government: the Alberta taxpayer giving up something on the order of six thousand dollars per year for health insurance should not also be forced to endure multiple appointments where one would do, sub-standard care, and long waiting lists for services.
Taken together what these recommendations say is that because the numbers cited show that Ontario does health care both better and for less, the UCP government should attempt to negotiate movement toward Ontario's costs and performance with stakeholders and, failing success, use its legislative majority to force change.
No actual steps in the process beyond the minor privatization suggested in recommendation three and the use of legal force to reduce physician fees are defined and the logic by which comparisons to other provinces become fiscal and performance targets is elided - as are the definitions needed to understand some of the numbers used in support of the recommendations.
As a result a naive reader could see the report as justifying an across the board 20% cut in health care expenditures by Government.
The reality is that the Minister of Health cannot order a 20% across the board budget cut for Health Services in Alberta and expect to survive politically - and the health care system as presently constituted cannot maintain even its present poor service levels in the face of even relatively minor budget cuts. Thus all four recommendations are either not actionable or both politically suicidal and against the health care consumer's long term interest - and this problem, mutatis mutandi, applies broadly to all 26 recommendations: they're either meaningless or contrary to both the government's own political viability and the long term interests of the taxpayer.
The blue ribbon panel could have approached the job in two other ways:
- by looking at specific cost components and drivers in the system as it exists today and making recommendations aimed at reducing their effects on the operation and cost of the system. For example, the imaginary recommendation:
Imaginary Recommendation:Establish a task force under the leadership of an MLA with some medical and/or legal services experience to eliminate, by fiat if necessary, at least 50% of reporting and record keeping requirements currently faced by front line practitioners and organizations throughout the health care system. Give the task force five months to make recommendations based on stakeholder input from all levels and a further seven months to supervise the removal of these burdens from the system. Empower the task force chair to abrogate third party contracts and/or remove from office AHS and other taxpayer funded personnel considered either obstructionist or incompetent in achieving the objective.
is fully actionable and responds directly to two major factors (reporting requirements and process delay) driving costs up and performance down in the system - remember a 10% reduction in the average reporting and related paperwork burden amounts to adding about 1,200 doctors to the system at negative cost to the system.
- Or, the panel could have chosen to examine how the system works, how it got this way, and so what the political options are for reducing or eliminating the major effects of operational issues driving cost up and quality down.
In that vein, the health care section of the MacKinnon report could have looked something like this essay (Explaining the health care disaster in Canada) I drafted in 2011 and updated a bit in 2014.