An important pattern of public finance, which first began to take hold 30 years ago, has since become deeply entrenched. It bids fair to continue to shape ”” I would say distend ”” public finance for years to come. I refer to the role that health care spending has played, is playing, and will continue to play in the public finances of Canada ”” and what that spending means for other sectors of Canadian life, especially its colleges and universities.
Post-secondary education has been a consistent loser in the battle for public funds against the competing priority of health care. This statement is deliberately framed as a strug- gle between two competing choices. But so remorseless has been the growth in spending on health care that it has squeezed not just post-secondary education but many other worthy matters as well.
Health care is largely about yesterday and today, in the sense that the vast majority of health care expenses are accumulated in the final years of life; whereas education, and post-secondary education, is about today and especial- ly tomorrow. A well-educated workforce is a key ”” not the only key, but a key ”” to tomorrow’s wealth and productiv- ity. On these our ability depends to sustain social programs such as public health care. I am not suggesting that we scrap medicare, thereby abandoning publicly financed medicine for the bulk of the population. Health care is an important public service. It is recognized as such by all industrialized countries. But we have sadly missed an opportunity in recent years to re-cast our thinking about health care, espe- cially to put its requirements in the wider context of all pub- lic policies. And in ways that we cannot know precisely, but that will surely appear in outline, we will all pay a price for missing that opportunity.
Health care, or medicare if you wish, has become a Canadian icon. It has become not merely an important public program, as health care properly is in every country, but something more in Canada: an expression of our identity, whatever that means; a way of differentiating ourselves from the United States; a program to make the nation proud; and, as commissioner Roy Romanow said repeatedly, an expression of our values. Health care, he argued in his report, was essentially a moral question ”” so moral indeed that he wanted to raise health care to the level of a covenant, and covenants, as we know, are above laws, regulations and treaties. They are either between a people and their God, or solemn agreements among nationals on the most fundamental issues, as in the International Covenant on Human Rights.
Fortunately, this particular Romanow invention never took off, but the mere fact that he raised it illustrates that when serious people talk about health care in Canada, the debate soon rises from the pragmatic to the ethereal.
Icons are hard to change, by the very fact that they are icons. Icons are supposed to have an everlasting quali- ty, like the ones hanging in an Orthodox church. They are certainly difficult to attack, since they are viewed so reverentially that any asper- sions cast upon them risk furious denunciations. That was certainly the case with our recent debates about medicare. Whatever you thought about those debates that ended at least temporarily with the federal- provincial accord of 2004, they did not address how to prevent medicare from continuing to squeeze almost every other area of government spending for the foreseeable future.
Sadly, the national health care debate was erroneously framed in two critical ways.
First, Canadians were told repeatedly ”” and this fit their own limited knowledge ”” that there were only two health care models, ours and the Americans’, and that anyone who questioned the icon of medicare wished to push us down the slippery slope to two-tiered US-style health care where, as Mr. Chrétien so eloquently put it, ”œthey check your wallet before your pulse.” That every other country in the world organizes health care dif- ferently than Canada ”” that we are outliers in the world ”” was not explained to Canadians, so that they feared any change might lead them toward a system they had been condi- tioned to fear.
Second, nowhere ”” not in Romanow’s volume, nor in Senator Michael Kirby’s five volumes, nor in any of the party platforms ”” did any- one explain to Canadians how by mas- sively increasing spending on health care we would influence other govern- ment responsibilities. They were told the political equivalent of a fairy tale: that we could massively increase our spending on health care, and that we could do so without raising additional revenues or reducing spending in real or absolute terms on other govern- ment programs. This is what Roy Romanow told Canadians. This is what Paul Martin told Canadians. And this is, apparently, what Canadians believe.
Except that it hasn’t been true, it isn’t true, and it won’t be true for a long time.
If Canadians had been made fully aware of the tradeoffs and still decided to spend what we have agreed to spend on health care, that would have been fine. The debate was properly framed. The tradeoffs were explained. And the people chose. That’s how democracy works. But that is not at all what hap- pened. Until very recently, politicians of every stripe and at both levels of gov- ernment, were so fearful of the fierce attachment people had to their health care system that they dared not outline the consequences. Even now, the politi- cal toll for telling the truth can be high.
Consider Ontario. There, Premier Dalton McGuinty was pilloried for telling a lie. He had promised, with considerable fanfare during the elec- tion, not to raise taxes. But in his first budget, he imposed health care premi- ums, a form of tax, and froze the budgets of 14 departments. So he was accurately described as a political liar. However, McGuinty lied to tell a truth. The truth was that Ontario could not spend another $2.6-billion on health care, plus more on pre-uni- versity education, while keeping taxes steady and having no impact on other government programs. He shot down the Romanow fairy tale, just as it has been shot down in his native province of Saskatchewan where the sales tax was increased and budgets of many departments were frozen in other to keep the health care budget rising beyond the increase in gov- ernment revenues.
We have been making tradeoffs, whether we know it or not, in favour of health care in every Canadian province for 30 years. We are still making them, and we will apparently continue to do so. When medicare was fully introduced in Canada in the early 1970s, health care consumed 7 percent of the gross national product; in 2003 and 2004 it consumed 10 percent. It will certainly go higher as a share of GNP.
A quick romp across provincial budgets for 2004 illustrates how the health care spending pattern of the last 30 years is continuing.
In Newfoundland’s 2003 budget, the Liberal government reported that since 1994-95, health care spending had increased by 63.6 percent ”” or by about 7 percent per year. By contrast, all other program spending had risen by 5 percent ”” or by about .5 percent per year ”” less than inflation. Health care over nine years by 7 percent; all other program spending by less than 1 percent.
In the 2004 budget, the Conservative government asked for savings of $2 million from Memorial University and the College of North Atlantic, while adding new health care spending in a range of areas, including $8.6-million for the Drug Program, and an additional $4.3 million for home care. The government listed ”œspiraling health costs” as among the major fac- tors contributing to the province’s cur- rent poor fiscal situation.
In Prince Edward Island, there was $750,000 more for UPEI and Holland College for a total of $1.5-million, compared to a $7.2-million increase for health””a ratio of about 5 to 1 in favour of health care.
In Nova Scotia, health care spend- ing rose by $233 million; all ”œeduca- tion” by $23 million.
In New Brunswick, health care was up 5.2 percent; universities by 2 per- cent ”” a ratio of 21/2 to 1.
In Quebec, health care rose by 5.1 percent; all other program spending by 0.5 percent. Although the education budget rose by 2.7 percent, very little went to universities.
In Ontario, universities’ budgets rose by 6.6 percent ”” but only to compensate for the tuition freeze and adding 21,000 new spaces. There was no real increase; indeed, while the gov- ernment committed to raise health care spending by $2.6 billion, it froze the budgets of 14 other departments.
In Manitoba, health care increases were restrained to 3.8 percent, and col- leges and universities received 3.5 per- cent. So Manitoba is an anomaly: a province where spending increases on health and post-secondary education rose at roughly approximate rates.
In Saskatchewan, the increase in health exceeded the entire operating budget of the University of Saskatchewan. In the budget, 72 per- cent of all new program spending will go to health. Health care spending will be up $165 million; post-secondary education spending by $16 million.
In rich Alberta, health care was up 8.4 percent; education by 5.7 percent. Said the budget, ”œThe health care spending path we are on today is sim- ply not sustainable.”
Finally, in British Columbia, the government promised $1 billion for new health care funding over the next three years, compared to $105 million for universities for increased access, favouring health care over higher edu- cation by a factor of 10 to 1.
The 2004 pattern was similar across Canada, Manitoba excepted. It is the same pattern we have observed in Canada for three decades. Health care spending is rising faster than post-sec- ondary education funding ”” and faster than everything else. With the excep- tion of four years in the mid-1990s when Ottawa successfully conquered its deficit problem that had been build- ing for three decades, health care has been rising faster than the growth in other government programs, the con- sumer price index adjusted for popula- tion growth, government revenues, growth in the gross domestic product, or any other measurement.
The recent federal-provincial agree- ment on health care means, among other things, a long-term con- tinuation of this pattern. Not only is Ottawa committed to transferring tens of billions of additional dollars for the provinces for health care, these trans- fers are indexed by 6 percent per year. Would that any other government program could expect a guaranteed 6 percent annual increase for as far as the eye can see! We are committed to spending $41 billion in new money ”” in additional money ”” from Ottawa on health care, to which provinces will add, according to their capacity and needs, additional sums.
It was sometimes said that our health care system prior to this agree- ment was being ”œstarved” for funds. The facts, as opposed to the rhetoric, were quite the opposite. Canada had ”” before the 2004 agreement ”” one of the highest per capita expenditures from public sources in the world on health care. The share of our GNP devoted to health care was tied with Germany as the highest for countries largely using a public system; that is, excluding the United States. From 1997 to 2002, Canada spent an addi- tional $34 billion on health care, and the federal government ”” again, prior to this agreement ”” had already pledged to spend billions more. We were quite literally pouring money into health care, even before the September 2004 health accord.
The figures do not lie. In 2000, 2001, 2002 and 2003, health care spending increased by 8.5 percent, 8.4 percent, 7 percent and 7.1 percent, according to the estimable Canadian Institute for Health Information. The CIHI reported an increase of ”œonly” 5.9 percent for 2004, but this did not include additional spending from the 2004 health care accord. The final figure will therefore be above 6 percent.
These increases represented, according to the CIHI, real rates of increase of 4.5 percent in 2002 and 4.6 percent in 2003.
Our newsletter about the public service.
Nominated for a Digital Publishing Award.
But this spending was apparently not enough. From every provincial capital, and from every federal party, came the cry for more money, lots more, cries that presumably reflected political leaders’ best judgment as to the priorities of the people and definitely reflected at the provincial level the health-care spend- ing juggernaut that was flattening spending on just about everything else while still being unable to shorten waiting times and provide timely serv- ice to enough of the population.
So now our leaders have agreed that Ottawa should spend another $41 billion over the next ten years, in the hope that this new infusion, in addi- tion to the previous, massive ones, will bring better health care to patients, shorten the time they must wait to gain access to it and eventually, by ”œbuying change,” somehow reduce the rate of increase in health care spending from 7 or 8 percent per year to some- thing more easily affordable.
For universities, there are two possi- ble positive outcomes, although I do not believe either will materialize. First, it might be hoped that all this additional federal money for health care, when combined with extra money for equalization for some provinces, will so ease the fiscal burden that finally provinces will have funds to invest in universities. It is more like- ly, however, that health care demands will continue to be so remorseless, and the political pressures that accompany these demand so insistent, and the politicians who need to seek re-election so frightened, that the 30-year pattern of health care soaking up everything governments are willing to spend, and more, will continue.
Second, although these provisions of the federal-provincial agreement are weak, provinces are supposed to show how they have accomplished certain objectives in return for receiving this federal money ”” especially reduced waiting times. There will therefore be some obligation to be seen to be spending the money for the purposes for which it was intended, in order to achieve and report on the agreed-upon health care objectives.
What about post-secondary educa- tion across the country? Between 1980 and 2002, government investments in public four-year universities in the United States rose 25 percent in real terms compared to a decline, again in real terms, of 20 percent in Canada. This will be hard to believe for those Canadians conditioned to believe that we morally pure people care more about public institutions than our hard-hearted American friends. In this, as in so many other areas, the stereo- type isn’t true.
From the mid-1980s to 2003, health as a share of total provincial spending rose from 30 percent to 37 percent, and in some provinces over 40 percent.
During that same period, post- secondary education’s share of total provincial spending fell from 7.5 percent to 6 percent to put matters another way, twenty years ago the ratio of health-care to post-secondary education spending was about 4 to 1; it is now6to1.
There has, happily, been a surge in provincial government support nationally (there are wide provincial variations) in the last three years. If you look at the national aggregate num- bers for increases in support for post-secondary education, there is much to be encouraged about. However, almost all of that money has gone into increasing the number of places ”” a public good in and of itself ”” and therefore in real terms government sup- port is actually lower per student than before this surge.
University enrolment has been growing strongly in recent years ”” despite tuition increases, except in Newfoundland, Manitoba and Quebec, where fees have been frozen. Full-time enrolment increased 11 percent between 1997-98 and 2001-02, accord- ing to Statistics Canada.
Where has the money been com- ing from to finance this surge? Largely from the students themselves and from the federal government.
Ottawa during the Chrétien years launched programs to assist Canada’s universities that were visionary and desperately needed. You can quibble about the administration of the pro- grams. You can claim ”” this being Canada, people will always claim ”” that this or that university is hard done by. You can offer all sorts of objections. But I ask you this: Are Canada’s universities, taken as a whole, better off or not for the $13 billion spent on them by the federal government or the Canadian Foundation for Innovation, the Canada Research chairs, the increases to the granting councils and the Canada Health Research Institute? That is the big picture question, to which I think the answer is a resounding yes. The only major down- side I can see to these federal programs is that they might have encouraged provinces to continue the pattern of the last 30 years.
Ottawa’s share of universities’ revenues is now 12 percent, compared to 9 percent in 1999. The provincial share is now 43 percent, down from 45 per- cent in 1990 and 58 percent in 1990.
That gap in provincial contribu- tions between 1990 and today has been largely filled by rising student fees. They rose an average nationally of 8 percent yearly since 1990 compared to 1.6 percent for provincial contribu- tions. This increase is larger in percent- age terms excluding Quebec, where tuition fees have been frozen since 1994, a freeze the Charest government has pledged to continue until the next election expected in 2007. In medicine, we were unwilling to shift any addi- tional burden to users; in post-second- ary education we did so massively.
Here’s what happened nationally since 1990. Ottawa’s contributions to post-secondary education have risen 70 percent, student fees by 154 per- cent, private donations and contracts by 116 percent, provincial grants by 10 percent. And it can’t be said faculty members have been getting too wealthy, since during that 12-year period, salaries and benefits across Canada for them rose 28 percent, or by about 3 percent yearly.
I do not believe there is a right or wrong number for fees. Societies or provinces can make different choices, as long as the net effect for the insti- tutions is that they receive what they reasonably need ”” and as I have argued these institutions have not been receiving what they need for 30 years, in large part because of the voracious health care budgets that have so distended public finance. Students in receipt of post-secondary education and society as a whole ben- efits from the maximization of expo- sure to post-secondary education, so that it is appropriate for both the stu- dents themselves and the public as a whole to finance these institutions. The aggregate national numbers indi- cate that higher fees have not deterred more students than every from enter- ing university. Indeed, Quebec has the lowest fees by far in Canada, but also among the lowest enrolment rates. It is also confirmed by numerous studies that the after-tax and after-inflation return of the student’s investment in university education is high, some- where in the range of 12 to 20 percent.
University and college graduates earn more than others. The majority of new jobs in Canada require advanced education. The economy of tomorrow will increase those requirements. It is both easier and more remunerative to have a post-secondary education, and there- fore it strikes me as appropriate that students pay a reasonable share of the up-front costs from which they subsequently draw benefits.
But we are in a box. The cost drivers of health, coupled with the disin- clination of Canadians to pay higher taxes, beg the question: where can the additional money come from for these institutions? Of course, universities can always try to find more money from non-government, non-student sources. They have been doing that with some success.
Society as a whole has to understand better what has been happening to these institutions in comparison to other public services. In the United States, it is an article of faith, shared by people in both political parties, that post-secondary education is critical as a social ladder of mobility and an eco- nomic engine of growth. They got that picture right a long time ago ”” for public post-secondary education. We, on the other hand, have not.
Everything we know about the keys to mobility and productivity tell us of education’s importance. And yet the pattern I have described tonight indicates that we Canadians still haven’t understood.
It takes a very long time to change public attitudes. It requires endless efforts in a variety of ways, and even then there is no guarantee of success. It seems to me that universities (and colleges) have been far behind the health care world in mak- ing the case for investments.
University people have been more reluctant to mix it up in the hurly- burly world of public debates. Universities have been scared to describe the pattern of spending. Some senior university personnel have med- ical schools in their universities and are therefore afraid of the internal rows that might ensue if they spoke of this pattern. Many are convinced that, given health care’s iconic grip on the public imagination, they could not possibly win any public sympathy; indeed, their institutions might risk a backlash. Perhaps a few are embar- rassed because in a few provinces in recent years, the universities’ budget- ary problems have lessened slightly. Many senior administrators are exceedingly busy and don’t consider trying to influence the general public worth the effort. A whole lot of people in universities, faculty members in par- ticular, just want to be left alone to do their work.
So for these and undoubtedly other reasons, universities have been out-gunned completely by the health care lobbies in the public debate about spending. In addition, of course, health care touches everyone, whereas post-secondary education is used by less than half the population, so that politicians will naturally be more influenced by health care than post-secondary education. It is much harder to explain the benefits society gains from a well-educated popula- tion than why more family doctors are required or why waiting times for a new knee should be reduced from eight months to six.
We should also understand that we are not alone in wondering about our institutions of higher edu- cation. The British have recently gone through a serious debate that culmi- nated in income-related tuition fees. The Germans, deeply alarmed by their university world’s sagging inter- national reputation, are trying to cre- ate 10 elite universities. Huge classes, chronic public under-funding, the loss of the best professors to the United States ”” these are part of the European university scene.
There is, too, a sense among the public that universities and colleges are too cocooned from the real world. The overwhelming emphasis on research ”” the old syndrome of ”œpublish or perish” ”” means that it is valued over teaching, to the detriment of students in too many cases. I have been in too many universities for too many periods not to be unfavourably impressed when I walk down halls in which professors list their visiting hours as 2:30-4 p.m. Tuesday or 10-11:30 Thursday, or whatever. Tenure is a very sore spot for me. I agree with the former president of Middlebury College, John McCardell Jr., who recent- ly wrote in the New York Times:
Tenure is a great solution to the problems of the 1940s, when the faculty was mostly male and academic freedom was at genuine risk. Why must institu- tions make a judgment that has lifetime consequences after a mere six or seven years? Why not a system of contracts of varying length, including life- time for the most valuable col- leagues, that acknowledges the realities of academic life in the 21st century. When most tenure documents were originally adopted, faculty members had little protection. Today, almost every negative tenure decision is appealed. Appeals not upheld internally are taken to court. [In fairness, he is talking about the litigious United States.] Few, if any, of these appeals have as their basis a denial of academic freedom.
It is equally understandable when the public shakes it head at some of the internal debates at universities, usually led by individuals of groups who, unable to change the world, try their theories on the university, and unable to change the university, try them out of their faculties, and unable to change their faculties, try to impose them on their departments. As C.P. Snow so accurately wrote, the politics of a university can be so nasty because the stakes are so small.
Is there anything that can be done? If anything is to be accom- plished, it has to start inside the universities. So universities can look to themselves. But, even so, they must look to a wider public to understand and support their mission. There must be a recognition that as public institu- tions, their fate depends upon the pub- lic ”” not just government elites, but the general public. And that means taking the case to the public.
Of course, universities must make their case to governments. It will not be easy, notably because of the health care sponge. But think of matters this way. It is well known that among the largest challenges facing universities is the retire- ment of faculty members. We are not graduating enough Ph.D.s to replace those who are retiring. The competition for new facul- ty members will be intense. We spent lots of time wor- rying about a shortage of doctors; we spend almost no time worrying about a shortage of professors. If Ottawa were to spend $500 million ”” and ask the provinces to match it ”” we could create something called the New Researchers of Tomorrow pro- gram that would allow universities to hire new faculty. And for $500 mil- lion, we would get much more bang for our buck than $500 million dropped down the drain of the health care system.
The trouble is that Ottawa, or at least Paul Martin’s Ottawa, after all the excellent work of the Chrétien years, thinks that its work is now finished. Health care, cities, child care, aborigi- nals: these are the government’s prior- ities. Worse, the government is committing so much money for these programs in the next 5 to 10 years that there will be small pickings left for everything else.