FINA Committee Meeting

STANDING COMMITTEE ON FINANCE

COMITÉ PERMANENT DES FINANCES

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, October 2, 2001

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[English]

The Chair (Mr. Maurizio Bevilacqua (Vaughan—King—Aurora, Lib.)): I'd like to call the meeting to order and welcome everyone back to our pre-budget consultation round tables. The next groups appearing in meeting number 41 of the finance committee are the Canadian Consortium for Research, the Canadian Dental Hygienists Association, and the Canadian Healthcare Association.

Many of you have appeared before the committee, so you probably know how we operate. We give you five to seven minutes to make your introductory remarks. Thereafter we engage in a question and answer session.

We'll begin with Dr. John Service, chair for the Canadian Consortium for Research. Welcome.

Dr. John C. Service (Chair, Canadian Consortium for Research): Thank you, Mr. Chairman and the committee, for inviting us today. I have with me Dr. Donald McDiarmid, a physicist with the Canadian Association of Physicists.

The Canadian Consortium for Research is a group of scientists who are involved in the natural sciences, social sciences, health sciences, and humanities. It is an organization that started in 1976. It comprises about 22 organizations.

One of the interesting things about our group is that we have researchers and scientists who are in universities, in government, in the private sector, such as chemists, and we have a group who are downstream users and appliers of research, such as those who work in business and industry at Nortel and in private practice in psychology in the community. These people have masters and doctoral degrees and apply the basic end applied research that is created within our universities and government. So we're an interesting group in that respect. We bring together a lot of different people around our table.

We appreciate very much again having the opportunity to meet with you. Our brief is entitled “Creating Opportunity”, and it's a framework for looking at the funding and support of research in Canada. Within that are a number of very important parts that go together to make up the innovation and research enterprise in Canada, one of the very important components, and we see this as a framework that needs to move forward together. We don't list a number of priorities, one more important than the other, but rather say that in the short term and medium term these different components need to be addressed within a framework.

What are some of the issues at hand for our community? Certainly, the base budgets of the granting councils are a critical issue. They are essential to the innovation and research enterprise in Canada. We understand that there have been significant pressures on the base budgets over the last year or two that have made it increasingly difficult for them to do the job we need them to do. These creative tensions include the creative pressures that are put on the base budgets by virtue of some of the important programs the federal government has put into place, like the CFI, the chairs program, as well as some initiatives taken by the provincial governments.

Another is that there wasn't a budget last year, and so the granting councils did not receive an increase; this has made it more difficult, because the demand has gone up. Also, there are emeritus faculty who are retiring and continuing their important research, while there are new faculty coming in, and there are pressures at both ends of the system.

There are other pressures as well, which will be much more articulately put forward to you by the granting councils themselves. But the Canadian Consortium for Research is really strong in its support for the base budgets of the granting councils.

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We also have an interest in the core funding of universities, which has been, as you know, an issue of concern for a number of years. It relates to deferred maintenance, deferred capital investments, increasing pressure on tuition fees, which relates directly to access to university programs at a time when a university education is absolutely essential. So we want to support very strongly the notion that core funding for universities is a critical issue, and we urge you to take that into consideration.

The indirect costs for research are an issue that will be put before you by others as well as ourselves. Currently, the indirect costs for research are borne mostly by the universities themselves, and this places a significant burden on their finances. They encompass things like laboratory maintenance, libraries, ethics reviews, animal care, and the like. We strongly support consideration of an indirect cost for research program, but do so with some provisos directed at ensuring that the smaller and medium-sized universities don't become disadvantaged within such a program. The provisos are listed in our brief.

As an organization, since 1976 we've strongly supported government research. It occupies a very important position in Canadian society. It provides information and research for public policy, it protects Canadians, it develops our knowledge of important infrastructures like oceans, continental shelf, the environment. So we see it playing an extremely important part in Canadian society, and we hope you will take into consideration that the science-based departments in NRC and the national facilities are in need of support within a framework that allows them to do what we need them to do, what they need to do for us. So for the life of the CCR we have been a group that has taken a very serious interest in government science.

The last issue I'd like to bring to your attention is the chronic underfunding of the Social Sciences and Humanities Research Council. It's something the Canadian Consortium for Research has considered a serious matter for a number of years. We're glad to report that there seems to be a consensus growing, within government and outside, that this isn't in the best interests of the country, it isn't in the national interest. We just point out that the majority of students in university and faculty are in the social sciences and humanities and that Canadians continue to choose this as a career choice and an avenue of learning.

We would point out that these graduates at all levels, bachelors, masters, and doctoral, are very successful in getting jobs, they're very valuable within the Canadian economy; that captains of business and business leaders indicate that these are very important employees; and that the research that comes out of the Social Sciences and Humanities Research Council, such as that done by political scientists, economists, psychologists, historians, sociologists, lawyers, and the like, is critical to the functioning of Canada as a democracy, as well as its economic well-being. So we urge you to look at that issue as well.

Thank you very much. These introductory remarks are much more broadly expanded in the document. I look forward to having a chance to discuss them with you.

The Chair: Thank you very much, Dr. Service.

We'll now hear from the Canadian Dental Hygienists Association, Ms. Salmy Lavigne.

Ms. Susan A. Ziebarth (Executive Director, Canadian Dental Hygienists Association): Actually, it's Susan Ziebarth. I'm the executive director of the society. I will be speaking, but joining me is Salmy Lavigne, who is the director of the School of Dental Hygiene at the University of Manitoba and the current president of the Canadian Dental Hygienists Association.

The Chair: We look forward to your comments as well.

Ms. Susan Ziebarth: Thank you.

The Canadian Dental Hygienists Association would like to thank the House of Commons Standing Committee on Finance for the opportunity to appear before it and take part in this years pre-budget consultations.

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Our association represents the voice of Canada's 14,000 dental hygienists. The association serves the public by developing national positions and standards related to dental hygiene practice, education, research, and regulation. In 1988, the federal government identified dental hygienists as the only health professionals whose primary concern is the prevention of oral disease.

Good oral health is crucial for the social and economic well-being of Canadians. As a first point of contact in the oral health system, dental hygienists assess, plan, and implement preventive care. A serious lack of access to preventive oral care is evident for those who experience a low socio-economic status, limited access due to physical disability, illness, distance from services, and lack of or restrictive dental insurance plans,

In May 2000 the Surgeon General of the United States released a groundbreaking report on oral health. This report alerts Americans to the full meaning of oral health and its importance in relation to general health and well-being. This warning is equally important for Canadians and their governments, to ensure Canada's role as a major player. Periodontal diseases are linked to major health problems, including heart disease, stroke, respiratory diseases, osteoporosis, and diabetes. Unless our health care services and the way we deliver them are refocused on preventing illness, rather than just treating it, Canadians will be stuck in a spiral of increasing public expenditures, with no real solution to our health needs.

The ultimate recommendation the Canadian Dental Hygienists Association could make would be to include oral health services with medicare. In light of the current economy and fiscal reality, we would suggest as a first step funding categorical public insurance programs in populations of greatest risk, for example, school programs for children, or oral health programs for the elderly or institutionalized. Specifically, we recommend that the $2.2 billion earmarked for early childhood development include preventive oral health care measures.

Despite numerous surveys showing that a significant portion of the population does not have access to preventive oral health care services, policy-makers have not taken effective steps. We concur with our colleagues at the Canadian Healthcare Association that ensuring access to health service on the basis of need and not the ability to pay is essential. If policy-makers wish to provide equal opportunity to succeed, we must recognize that those who can benefit the most from oral health care services are the ones least likely to have access and most likely to have problems that will lead to serious medical conditions beyond the mouth.

The CDHA recommends that the federal government work with the provincial governments to support programs and policies that will equalize access to affordable oral health care. As an example, an examination of the current medical-dental tax credit reveals that a high deductible is useful only for major medical conditions and does not encourage illness prevention.

Canada could enhance its competitive economic position through better health care. The 1998 spring issue of Statistics Canada's Perspectives on Labour and Income indicated a serious lack of productivity in the Canadian workforce through absenteeism. Most of this absenteeism is due to poor health. Missing and unfilled teeth mean pain, loss of sleep, poor performance, low self-esteem, and cause difficulties in both getting and keeping a job. Periodontal disease is the most prevalent chronic disease, so it is no surprise that the state of the population's oral health affects workplace productivity.

We recommend that the federal government encourage its provincial and territorial partners to remove restrictive regulations, where they exist, that deny Canadians direct access to dental hygienists' services. This proactive reform of service delivery will improve access to professional care and reduce health care costs in service delivery and through reduction of future incidence of illness and treatment.

The federal government can lead by example and improve access to preventive health care services for the Public Service Dental Care Plan and Pensioners' Dental Services Plan members by directing their plan insurers to delete the words “under the supervision of the dentist”. It should be of note that the Pensioners' Dental Services Plan is the only program administered by Sun Life in Canada that retains this inappropriate restriction.

Access to preventive oral health care services must be improved if Canada wants to ensure a national competitive advantage. A healthy workforce is productive and competitive and one that practices good oral hygiene. We know that dental hygienists' goal of contributing to the well-being of all Canadians is one shared by the members of this committee, and we would like to conclude by thanking you for allowing us to present on behalf of the Canadian Dental Hygienists Association.

The Chair: Thank you very much.

We'll now hear from the Canadian Healthcare Association, Ms. Sharon Sholzberg-Gray, president and chief executive officer. Welcome back.

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Ms. Sharon Sholzberg-Gray (President and Chief Executive Officer, Canadian Healthcare Association): Mr. Chairman, members of the committee, thank you for the opportunity to appear before you today.

As you know, the Canadian Healthcare Association is the federation of provincial and territorial health and hospital organizations, representing the broad continuum of care. The regional health authorities, hospitals, and other facilities and agencies that are part of our federation serve all Canadians and are governed by trustees who act in the public interest. CHA and our members are committed to realizing the vision of a publicly funded health system that provides access to a broad range of comparable health services across Canada. You received our brief, which is some 21 pages, in August.

Given the recent terrorist attacks and Canada's new commitments related to them, and given the economic forecasts, which show a slowing economy, further buffeted by the extraordinary circumstances that have occurred over the last couple of weeks, and given the recent announcements of generous increases in federal health spending over the next two to five years, it may seem incongruous that I'm appearing before you today to urge the federal government to increase its contribution to health funding in this country. However, the reality is that there is still unfinished business from the first ministers health accord of September 11, 2000, and this stems from underfunding of health care by all levels of government, federal, provincial, territorial, through the 1990s. It is important, particularly in these uncertain times, to maintain the social fabric of Canadian society by ensuring a sustainable health system that can meet the health needs of Canadians now and into the future. And now is not the time to allow our social fabric to unravel. Remember that our health system is an essential component of national security.

As you have recognized in focusing your questions for these committee hearings, our publicly funded health system is a foundation for global competitiveness, equal opportunity, and quality of life. A poor economic forecast is more of a reason, not less, for stabilizing our health system. After all, Canadians still require access to health services on the basis of health need, not ability to pay.

In the days ahead, it will be important to focus on our health system, not as a drain on the economy, but as a vital component of Canada's competitive advantage and something that's absolutely essential for the private sector. Many simplistic solutions to problems in our health system focus on shifting cost to the private sector, and this is a sector that does not appear able or willing, especially now, to absorb increased health costs for their employees.

So within this social and economic context, CHA urges the federal government to create a both/and, not an either/or decision-making environment, to provide leadership in allocating resources, and to support both the health system and the broader social infrastructure—and I include here education, the environment, and national security. The Prime Minister himself noted on September 25 that the government can do more than one thing at a time. CHA urges the federal government to consider its ongoing substantial contribution to the health system as an investment in the personal health of Canadians and the economic health of our nation.

I have to say here that CHA and its provincial and territorial members have never shirked our responsibility to advocate appropriate system change. We continue to provide leadership for system change, but we note that adequate funding is required to support that change.

So here are our recommendations for health funding commitments in the next federal budget, and into the future as well, if we want to think in the long term. CHA recognizes that the federal, provincial, and territorial governments must adequately fund health services and carry out their respective responsibilities, but since we're presenting today to a federal committee, our focus is on the need for federal commitments.

First, we need to stabilize the existing health system, and here we urge the federal government to raise the CHST cash floor for 2002-2003 to $19.8 billion. This is an increase of $1.1 billion, through our calculations, and note that we're not including the amount dedicated to early childhood development. CHA also urges the federal government to explicitly announce its commitment to an annual escalator to apply to the CHST cash floor beginning in 2003-2004.

Second, we need to address urgent needs. CHA urges the federal government to work with the provinces and territories, and national health organizations as well, to determine an adequate level of federal funds over a five-year period to be earmarked as specific targeted funds for a number of areas. These include, but are not limited to, health human resources, medical equipment and health care technology, and health information technology.

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Third, we need transitional funds to support appropriate system change. We talk a lot about system change, but we don't seem to be able to get from talking to action. We need more federal funds than are already dedicated to primary health care reform, health promotion, disease prevention, mental health services, and palliative care.

Next, we need to meet future needs now. In that connection we urge the federal government to commit at least $1 billion in 2002-2003 to ensuring that Canadians have access to health services across a broader continuum of care, including home, community, long-term care, supported by a pharmacare program. Here the federal, provincial, and territorial governments need to develop common objectives. The initial amount of $1 billion will need to be reviewed and likely enhanced. But it would be a start.

It's important to note here that if a province or territory has an existing program that meets new common objectives, they would be eligible to receive the new federal funding, which can then be used to improve this program or other health services. While health systems across the country will continue to be different, reflecting regional needs and realities, the common feature will be adherence to objectives agreed upon by federal, provincial, and territorial governments, to ensure that all Canadians have access to needed health services.

Another important commitment would be to ensure that there's access to health care on the basis of health need, not ability to pay. Here we urge the federal government to develop mechanisms to monitor the level of private funding and private delivery within our health system and its impact on accessibility and quality of services.

We also need to uphold a strong federal role in health for the purpose of achieving access to comparable health services across Canada. That's why the federal government has to continue to provide adequate levels of cash in addition to the tax points—by the way we're one of the few national associations that recognizes it as a contribution.

We urge the federal government to promote the necessity of equalization payments, so that Canadians across the country understand the relevance of these payments in ensuring that everyone has access to services.

Finally—and we might be the only group that's mentioned the GST in these hearings, I don't know—we'd like to raise the issue of the GST. You might be unaware that a number of hospitals or regional health authorities are currently being audited to ensure that they are in compliance with the GST. For those of you who are unaware why the GST is an issue for the health sector, let me explain. Hospitals get an 83% rebate on GST paid, while not-for-profit long-term care facilities receive a 57.14% rebate or a 50% rebate, depending on whether they're municipal entities or not. The government, or at least people at CCRA, want to be sure the 83% rebate is not being inappropriately claimed by health facilities that are not hospitals, according to their definition of what a hospital is. Frankly, health reform has blurred the distinction between various health settings.

What we're saying here is that all this is a waste of time. There should be one rebate rate for the entire health care sector. Money is being spent right now, as I speak, on administration and audits that should be spent on patient care. I've written to the Ministers of Finance, National Revenue, and Health, and have not been able to resolve this problem—by the way, it's a policy one, not an administrative, national revenue one. It has to be addressed, it seems to me, in the next budget.

So I've outlined a number of key issues, and I hope we'll have an opportunity to explore in more detail some of the issues I've raised. We've also had distributed to you copies of a brief we released a couple of weeks ago—unfortunately, on the very date of September 11, 2001—on the private-public mix and the funding and delivery of health services in Canada, challenges and opportunities. I hope I'll be able to answer questions on all the issues raised in the various submissions we made to you. Thank you for hearing me.

The Chair: Thank you very much, and thank you for the comprehensive brief you sent to us in August, and now this new report will provide us with the necessary information to address these key concerns.

We will move to the question and answer session. Mr. Epp, you'll have ten minutes.

Mr. Ken Epp (Elk Island, Canadian Alliance): Thank you, Mr. Chairman, and thank you to all of you for being here today.

I'd like to begin with the Consortium for Research. You say that Canada grants only one-third as much for R and D as does the United States. What do you base that on?

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Dr. John Service: We base that on an analysis of the kinds of grants that are offered by the United States compared with the kinds that are offered by Canada, then parcelling out what part of the grant is for actual research costs directly and what part is for indirect costs. The Americans fund it differently from the way we do.

Mr. Ken Epp: So you're talking about the granting by the federal government.

Dr. John Service: Yes, sir.

Mr. Ken Epp: Okay.

Second, I have a question with respect to the direct versus the indirect costs of research. I'd like you to expand a little on that, because the distinction isn't clear to me.

Dr. John Service: My colleague here might be able to help us out as well, but the indirect costs tend to be things like laboratory maintenance, libraries and knowledge infrastructures within universities, the ethics review processes that are required for human research particularly, the costs that go into animal care. These are all costs incurred by the universities that surround the research grant that comes through the granting councils. Those are the indirect costs we're speaking of, whereas the direct costs would be those funded by the granting council itself.

Mr. Ken Epp: How would you propose that should be administered? Because you could ultimately say that maintaining the whole university is an indirect cost. If it weren't there, you couldn't do the research there.

Dr. John Service: That would be a broad definition exactly. A number of proposals have been suggested. I think we would agree most with the one that says block transfers from the federal government to universities would be the best way to go, as opposed to attaching the costs to grants going through the granting councils. There are some proposals as to percentages of the grants offered that would be directed to indirect costs, but the consortium itself is more in favour of the block grant proposal, as opposed to going through the granting council.

Mr. Ken Epp: Do you have any proposals that would show the difference in the cost of research, for example, involved in astronomy or in physics? That's much more costly than in some other areas of research. I'm not going to mention some of the specifics, because I'm not familiar with it, but it seems to me that, for example, educational research, though it's very important, does not have the upfront costs some of these other things do. How would you arrange for the federal government to make contributions that are in proportion to those costs?

Dr. John Service: That's an extremely good point. Within my own discipline of psychology we have neuroscientists who are looking at organic brain function and neurological functioning, and there are much different costs to that from those of some of the social science research that uses surveys, for example. You're absolutely right. But there are some formulas that can allow for a balance between the kind of really cost-intensive research and the indirect costs and the less cost-intensive research.

One of the problems is that in a funny way, some of the social science research, because of the 40% formula, will actually be underfunded, as the amount of the grant will be small and will not actually cover enough of the indirect costs. So there really needs to be some attention paid to that whole funding system, and also to making sure that the smaller and middle-sized universities don't get penalized in this process.

Mr. Ken Epp: It seems to me that if you go down this road, you're inviting the creation of a huge government bureaucracy and a large number of complicated forms to be filled in, which I think would be a distraction to most researchers. In fact, I've heard that even now they spend an inordinately large amount of time justifying their grants and putting in their submissions, compared to doing the actual work they would like to be doing.

Dr. Don McDiarmid (Director of Professional Affairs, Canadian Association of Physicists): I know there are groups within government studying this and have been for some time. I don't see why you can't do a statistical average, and if it's a block grant to the university, you do it as a statistical average. I don't think it need be an enormous computational effort. I don't think you need to go down to each individual grantee and work out what the value should be for him or her. You do this more on a block basis, and it would certainly put us much further ahead.

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I've heard an ex-university president say he almost cringed every time one of his faculty got an increase or a new grant, because he knew he was going to have to make expenditures out of his ordinary budget to cover the indirect costs.

Mr. Ken Epp: Well, thank you. I have much more to talk to you about, but I want to get to the health situation as well.

Now from the dental hygienists, my favourite profession—you know, I just love going to the dentist and these guys, so much fun. I guess I come into that category you have in your presentation, what proportion of people fail to go every year.

I want to ask you a question, though. You suggested that oral health should be included in the health care system. I've had the same presentation from people with respect to vision. I think you have a pretty strong case here. Why should this part of the body be excluded from health care, where this part is included? Is this a new initiative? This is the first time I can remember having this suggested at the finance committee, but then maybe it's a failing memory. Have you done this before? Are you frustrated because it hasn't happened yet? Or is this a new initiative?

Ms. Susan Ziebarth: I believe it is a new initiative to actually speak of including it in the universal system. From the time we're very small and our parents tell us, don't put that in your mouth and don't put this in your mouth, it's because everybody understands the connection between the mouth and the body. But we tend to forget that, and we tend to forget that if we don't actually see it going into the mouth, it may still be already there.

I think the real impetus behind this has come from the extensive research that has come out of the United States in the last year, specifically in regard to the Surgeon General's report, where he really does show the connection between the mouth and the rest of the body and the effect of oral health on the rest of the body, giving for, I think, the very first time solid, concrete evidence that could make a strong case for that.

Mr. Ken Epp: Have you actually, at this stage in your development of this idea, engaged the services of an economist or somebody who can work through the actual costs? As I just think about it in a very preliminary fashion, quite clearly, if oral health were included, both the prevention and the restorative procedure, the costs would be transferred to the public system from, presumably, private costs, either through insurance companies or paid directly.

Ms. Susan Ziebarth: Yes.

Mr. Ken Epp: What would be the financial implications?

Ms. Susan Ziebarth: We actually have employed the services of an economist, and we have a draft report that is back, but we're not at this time able to release it. Closer to December we would be able to provide you with a copy of that.

Mr. Ken Epp: That would be great. I don't know whether I'm ready now to jump up and down and say I'm an advocate of this, but I do want to get more information on it and explore it, because it seems to me that the costs are there one way or the other and we have to look at how to handle that.

I have, I think, a few milliseconds left to talk to the Canadian Healthcare Association. You indicated something about the private sector not being able or willing to do something, and then I didn't get the rest of it. What did you say there?

Ms. Sharon Sholzbert-Gray: What I was really trying to say is that it's a simplistic solution to say we can enhance access to health care by shifting costs to the private sector, which is not willing or able at this point to pay more for private health insurance for their employees. Most employers are very concerned about what they call payroll costs, and that includes their contributions to EI, their taxes and what not, and their contribution to employee insurance.

If we simplistically say the easy solution to the problems in our health system is to have more private payment, what we really mean is shifting more cost to the very employers who are now covering a lot of dental care, extended health care, vision care, and those kinds of things. So basically, cost shifting is not cost saving. The answer is to have an efficient, effective system as much as possible on the public side, with supplementary, extended insurance for certain parts of the system that we've agreed can provide access there.

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What I'm saying is that shifting $1,000 per employee to the private sector is not going to solve anything. In fact, if you look at some of the evidence we provided in our main brief, it shows that in the United States the average employer pays about $3,000 per employee, whereas our employers pay about $450 per employee for health benefits.

There's a substantial competitive advantage in paying less for employee costs for health care, and it seems to me that we've been very efficient on the public side. But that brings me back to the, I think, very persuasive arguments presented by my colleagues, the dental hygienists. It seems to me we can't have the entire health system publicly funded. We right now have a 70-30 division, and perhaps the private side is going up a little too high, especially because it's done without any individual decision-making, it's been done passively, without any real understanding of what the consequences are. But we aren't going to have, it seems to me, at the end of the day, more than a 75-25 world. So the issue is, what part of the health system is it legitimate for the private sector to pay for and still provide access for Canadians?

It seems to me on the dental hygiene side, for instance, that you would start with groups at risk, children , elderly in institutions, as my colleague has recommended, with some supplementary coverage, as is the case now, by the private sector. But there are other parts of the health system where, it seems to me, the universal approach of the Canada Health Act serves us very well and shouldn't be tampered with. Then look again at long-term care, where there are co-payments. Nobody in a long-term care facility doesn't have a co-payment, ranging from $700 a month to $3,000 a month, depending on what province you live in. Perhaps we should have uniformity or better standards there.

So I think the public-private mix is a crucial issue here, but whatever conclusion we come to, the solution of just shifting more to employers in this country is a simplistic and not very efficient or appropriate solution.

The Chair: Thank you, Mr. Epp.

Mr. Ken Epp: Thank you.

The Chair: Let me just follow up there for a second. Some commentators say that basically, our health care system is not sustainable, because costs are going through the roof, as they would say. What do you have to say to them? Apparently it's 7% per year, so if you multiply that for 10 years, that's 70%.

Ms. Sharon Sholzberg-Gray: I would say that some of the things people say are based on myth and not reality. Over the 10 years through the nineties, in real per capita terms, public health expenditures went up an average of 1% a year, private sector expenditures went up 2.5% a year. I think people aren't looking over the whole decade, they're just looking at a few years. And I have to tell you, it's that bust-boom approach to health care that creates 5% or 6% increases right now, because of the fact that for about four or five years through the nineties we actually had negative growth, we had real cuts. In fact, we were one of the only countries in the western world to have real cuts between 1993 and 1997. So what we're trying to do is make up for the cuts. And our solution is really to have a balanced approach, a reasonable increase each year, based on population growth.

By the way, I note that our brief says the population was increasing at 0.8% a year, and new statistics now say 1% a year. Those are more people to take care of, so we have to factor that in. But it seems to me that we then could add a reasonable factor of less than 3% and sustain the system. The problem is, when you're averaging 1% over a 10-year period, you're not sustaining the system, and we're trying to make up for lost time right now.

The issue is, if you transfer it to the private side, which went up 2.5% a year in real per capita terms over those 10 years, how is that the solution to anything? We are the same people. Companies are going to pass the costs on to consumers in any event, if they have to absorb more health costs. The solution is, it seems to me, for all of us to work together, the private sector, government, and everybody, to have a system that is sustainable, and that includes a wellness promotion approach, primary care reform, an integrated approach, care always provided by the appropriate provider in the appropriate setting, which might be the cheapest, a proper approach to drug utilization.

Note, by the way, you're asking whether we could sustain our health system. A lot of the problems of sustainability are non-Canada Health Act services, like pharmaceuticals. The private sector hasn't solved the problem of costs there, even though that's not part of the publicly funded system, except in a patchwork way across the country.

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I think we can sustain the system through reform and appropriate, reasonable increases. We can't sustain a system with no growth for five years, and then try to make up for lost time for the next few years.

The Chair: How difficult is it to measure the efficiency of the private sector versus the public sector, or private sector involved within a public sector?

Ms. Sharon Sholzberg-Gray: I don't think it's very difficult at all, because there are a lot of studies, and most of those studies, of course, have shown that except in very routine kinds of procedures, it seems to cost more in the private sector. There are studies that show that dialysis costs more in private sector—that's dialysis units in the United States—than in not-for-profit ones.

It seems to me there is a role for private delivery in certain areas. We have private diagnostic testing paid for by the public purse in the province of Ontario. If you get a slip of paper—and I don't want to give a commercial—and you go to Gamma-Dynacare, you can get your blood tested, publicly funded. You can go to a private ultrasound clinic or an x-ray clinic and get an x-ray, publicly funded.

It seems to me that with something that's very routine, not intrusive, not complex, the private sector could deliver those kinds of procedures very well, and it's not necessary to go into a hospital every time you need one of those tests. But when you're going into complex care and complex provision of tertiary care, for instance, I don't see where the private sector would come into it. We don't have a history of private sector provision of hospital care, even before medicare, in our country. Remember that the hospitals of our country were developed by communities, by charitable groups, by voluntary groups, by religious groups. Even when people had to pay to go to a hospital, or didn't pay if they were a charity case, those hospitals weren't developed by private companies in our country. They're controlled by our communities. To suggest that if they were privately managed somehow, they would be more efficient, it seems to me, is also a simplistic kind of thing to consider.

The evidence is that we run our health care system very efficiently. The overheads, the administrative costs, in Canada are much lower than in the United States, for example, where there is heavier private delivery. The real issue is the system change to create the efficiencies in the system, not a question of private management versus not-for-profit management.

The Chair: So you're saying that if there's cost-effectiveness and efficiency in the private sector, you don't mind if we use that service.

Ms. Sharon Sholzberg-Gray: Our brief shows that there's nothing inherently evil about the private sector. The private sector has developed the information technologies that the health system has to use and acquire, a very important part of our economic development in this country. The private sector develops the medical devices and complex equipment that has to be used in the health sector. We buy the equipment, and there's nothing wrong with doing that, and here and there the private sector delivers ancillary services, food services—I won't comment on the quality of food services. They often run parking lots and that kind of thing.

In other words, in the area of ancillary services I think there's an argument. When it comes to complex care, I'd be concerned, because it ought to be the public who decide on the quality in that area. And I'm not sure there's any money to be made in the delivery of complex care in any event. It's very labour-intensive and equipment-intensive and technologically intensive, and if you're going to try to make a profit on it, something's going to have to suffer, quality,

And there's the whole issue of accountability, which is the important word in health care. Right now we have the accountability of governments, the accountability of trustees, those people who are on boards of hospitals and regional health authorities. I wouldn't want a private company responsible to shareholders making decisions on complex care, but on routine ancillary services I think we could look at things in a different way.

The Chair: Thank you.

We'll have Mrs. Barnes, Ms. Bennett, and Ms. Leung.

Mrs. Sue Barnes (London West, Lib.): Thank you, Mr. Chair.

Ms. Sholzberg-Gray, I'm just going to give you a heads-up. I'm going to ask some research questions, but while I'm doing that, you could be thinking about the information you have on palliative care, because I think that's something Canadians need to address and we need to finance. I wanted to get some updates on where you think we have or have not gone on that.

Dr. Service, your first bullet says you want increased federal transfers directed at core funding in post-secondary education. To my knowledge, we cannot force a province to spend on its post-secondary education. It's all well and good to give us a recommendation, but I come from Ontario, where we're the lowest per capita funder at a provincial level of post-secondary education, so unless you've got some idea how we can accomplish that, it's a recommendation that doesn't mean anything to me. We'll start there.

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Dr. John Service: This gets back to the CHST-PSE transfers and that whole issue. I remember when the CHST was first envisioned, the Canadian Consortium for Research and HEAL both argued against it, because of an accountability problem. When you put all this money together and you transfer it to the provinces, how do you notionally account for it? I could not agree with you more in your frustration about this issue, but what is our alternative? Is the government going to get out of the core funding of universities business? Because before the CHST PSE was a 25% contribution. That would be an important public policy debate to have, whether that is a part of the federal role?

Mrs. Sue Barnes: My point, though, to you was to acknowledge that one of your recommendations is not a feasible one under our existing situation.

Dr. John Service: I would argue that it is. This is a federal program, and there are other provinces that have invested more than Ontario has. I think it's a tragedy that Ontario hasn't, I again agree with you, but because Ontario hasn't, it doesn't mean that others haven't, and so I think it's important to continue that through the CHST.

Dr. Don McDiarmid: It seems to me it's first a question of whether it's recognized federally as a problem or not. If you recognize it as a problem, you seek to find some solutions. If you say we can't do anything, you don't even look for solutions. Meanwhile the cost is borne more and more by students, who end up with more and more debt.

Mrs. Sue Barnes: We're not debating that issue of whether there's a problem, because I seriously believe there is a problem. I come from a town with a university in it, and the president of the university is constantly coming at me on the indirect costs, and I understand that. Simply, it's like robbing Peter to pay Paul. Your undergraduate student is financing the additional costs of all the grant research and chairs of excellence we've put in place. It's a situation where, in a normal jurisdictional sense, you would have your provincial government coming in there. This is the first time I've heard somebody propose the direct funding to the institution, and you must be looking then, with all the post-secondary institutions, at some element of soft costs.

To my friend across the table there, it is as basic as the fact that when somebody gets a research grant, they have to find physical infrastructure, they have to heat that space, they have to budget, take care of all the administrative costs respecting the allocation of time, which can take away from undergraduate teaching time.

I spent part of last evening with some university students, and they are concerned about the increased tuition. Now we're getting ever more into deregulation of tuition, certainly with medical and business degrees in a number of universities. I know I couldn't have done my training professionally given the increased tuition now existing at some of the undergraduate levels, which I think is a problem we can address.

I would be more interested in something that takes a percentage link of soft care costs and takes it to the grant. I think that's a way we can more directly target that money, because then if it's attached to the research grants, whether it's 10% or 5% or whatever.... Do you have a problem? I'm a little surprised that you want to go globally, knowing what happens to global funds, when maybe there's an ability to target, if we allocate a percentage of every single grant being allocated, not taking away from the grant itself, but putting in an extra component.

Dr. John Service: Would a program such as you're talking about be an indirect cost program?

Mrs. Sue Barnes: Yes. Say some medical researcher gets a half a million dollars, then x per cent is a soft cost allocation.

Dr. John Service: Absolutely. In fact, we speak to indirect costs in our brief, and we support that, as long as it doesn't disadvantage the middle- and small-sized universities, which is going to be an issue that can be solved.

Soft costs and the kinds of issues that are related to the other problem are different, so they're not going to be both solved by just the soft cost piece, which is the indirect cost to researchers. That would be an important component of it, but it would leave out some of the stuff that has been traditionally funded by the federal government, and we would suggest that's a very important role. It's also a way that you've participated in provincial jurisdiction, so to speak, without a lot of flack.

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Mrs. Sue Barnes: But everybody is asking for increased pieces. You're plugging this week social sciences and humanities, and they just got their extra $100 million over five years. I know it's not a lot and it doesn't equal the other granting councils. But my point is, as we increase—and I believe in boosting the granting councils—the reality is that you can't do it on the same base infrastructure, and I think there is a recognition around the table of that.

I'll move on, because I know I have limited time. I do want to hear your thoughts on how fast or slow we're going on palliative care, because I know from my own community there's a huge need out there. I think of all the money we spend on the first part of life, and maybe we're not dealing the correct way with the last part of life.

Mrs. Sharon Sholzberg-Gray: Actually, our long list of proposals for system change would include an appropriate approach to palliative care.

It's interesting, because some years ago our association appeared before the special Senate committee on palliative care, and then appeared again some years later to see what progress had been made. Somehow, not much had been made. As you know, recently the federal government contributed $1 million to develop a palliative care strategy. In our big brief we're not talking about CHST, because we think there's limited value, frankly, in putting more and more money in a block transfer—not that we don't want the appropriate amount there. We might want to look, by the way, in the future at how in a specific transfer there might be more accountability and that kind of thing. Then my colleagues in the post-secondary side of things might feel that their side would also get proper amounts. That's a debate perhaps for another day—or perhaps today, I don't know.

But on the palliative care side, it's an area where we think there should be a special fund set up, to make sure we find a way of implementing best practices into the health care system. This is one case where there can be federal-provincial agreement for a special transitional fund. There could be projects implemented across the country in various provinces on a per capita basis, and there could also be some national projects, I think, where there is some value in that. There should also be public reports on progress and that kind of thing. This should be the way to lead into integrating these kinds of programs into our health system of the future, the one that will meet the needs of Canadians. Of course, that will include looking at the value of palliative care, as opposed to constantly trying to do more to save a life that can't be saved.

Mrs. Sue Barnes: Thank you very much. Thank you, Mr. Chair.

The Chair: Dr. Bennett, what's your prescription?

Ms. Carolyn Bennett (St. Paul's, Lib.): I would actually like to follow up on the chairman's remarks on productivity, particularly on health care.

One of our concerns has been that when we moved to a cost-containment model instead of a cost-effective model, we didn't actually fix the system, or we certainly didn't integrate the system. Most other sectors, when they've had a burning platform, have actually reorganized and made themselves more efficient. I want to know what the Canadian Healthcare Association thinks of the Fyke commission report that says there's still 30% waste in the system because it's not integrated properly. Even in 1998 at this committee the Ontario Hospital Association came before us and said this is about mismanagement, it's not about money. I guess I want to know if there's anything we can do in funding this differently to promote better practices and better efficiencies in the system.

Second, in your brief on access to comparable health care ,I don't see anything about measurements and outcomes. How do we ensure that in the federal-provincial negotiations the things that are measured are the things that actually tell us what's good for patients, instead of how much money is being spent on stuff?

Mrs. Sharon Sholzberg-Gray: First, with respect to the Fyke commission in Saskatchewan, I think we have to distinguish to some extent between what you're calling bad management and whether the system is appropriately reformed or changed. Interestingly enough, Saskatchewan is one of the provinces in which there is an integrated approach to health care, with district health boards that are supposed to provide the entire continuum of care.

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I think the problem in Saskatchewan, however, is that they have 30 district health boards in a small population, and the issue is whether 30 is too much or not. There are those who argue that local community control is so important that to reduce the number of health boards would be a mistake.

That's the efficiency issue. I don't think, frankly, that there's 30% wastage in the system in the way that it's simplistically put forward. I'm not suggesting that the Fyke commission report is simple. All I'm saying is that there are various values that one has to support or not support, and there is a value in having local control as well.

Costs are going to be higher in a small population spread over a wide territory. For instance, per capita costs are much higher in Newfoundland than elsewhere because of the difficulties of reaching people, distances, and what not. Costs are lower in an urban area. I do think that local control, especially control of volunteers in communities, is important as well. It's a question of looking at competing values.

As for so-called inefficiencies, first, no analyst has ever said the Canadian health care system is expensive to run. It is not expensive to run. It has very low administrative costs. Health care is very complex. It's much more complex to run a hospital or a health facility than it is to run Nortel—look at the problems they've had. If we ran any hospital in this country or any regional health authority the way some of the private sector organizations have been run, there'd be a problem.

With respect to outcomes, accountability, and that whole area, we should have brought our brief on accountability. We also did a thing on accountability, on the importance of measuring outcomes, on the importance of having proper information. In fact, our brief does talk about health information, data collection, and that type of thing, perhaps not enough, because I guess we assumed we had it in another brief on accountability. But we do consider that very important as well.

You're also saying that we only want to do those things that have positive outcomes, we don't want to do those things that may be a waste of money or don't create positive outcomes. On the other hand, we have a public that wants access to all medically necessary services. What we want really at the end of the day is an evidence-based system, one where you do everything, but on the evidence. We're talking about evidence based on clinical research, biomedical research, health system research, population health research, all the research that's being done under the auspices of the Canadian Institutes of Health Research. All that kind of research, I think, will help us as we move towards creating efficiencies and do all of those things that produce benefits.

So the answer is that there's no simple answer, it's complex. But we understand all those things. What we don't like is people saying, health care is a black hole, we put money in and there's never enough. What we're trying to say is, when you don't put money in for five years, you're right, there's never enough. It's hard to make up when you let equipment run down or institutions run down, or for that matter, universities run down, and that kind of thing. It is not a black hole, it's a very efficiently run system. It's very complex.

We're moving to system change. Perhaps if we had more dedicated funds, transitional ones, targeted ones, to achieve certain goals, with the need to report back on what goals have been achieved by using those targeted funds, that might be the approach to use. That's why our brief, as you note, talks about those targeted funds, transitional funds, funds with specific objectives, a special fund, for instance, to enlarge the continuum of care—not huge amounts of money, but enough to create the correct directions.

So that's our solution. In other words, look at things in a very targeted way.

The Chair: Thank you, Dr. Bennett. We'd be interested in receiving the report on accountability.

Ms. Sharon Sholzberg-Gray: Okay.

The Chair: If you could table that with the committee clerk, I'd really appreciate that.

Just be mindful of the fact that we have four more questioners and we have 20 minutes.

Ms. Leung, followed by Mr. Cullen, and then we'll go to Madame Picard and Mr. Nystrom.

Ms. Sophia Leung (Vancouver Kingsway, Lib.): Thank you, Mr. Chair. Thank you to the presenters—very informative.

My first question is to Dr. Service. I think a lot of us agree that social science research is underfunded. I believe that last year the Coalition for Post-Secondary Education really lobbied for that. You're probably aware of that. My question concerns the research you comment on. You probably know the government put over $3 billion in the Foundation for Innovation. I wonder would you comment, have you been utilizing that funding quite well?

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Dr. Don McDiarmid: I believe so, overall. One thing it does do is create increased demands upon the granting councils, because when you have equipment, you have people who want to use it, and so you have more proposals coming in, which in a way underlines the fact that you need to have balanced funding. You need funding for equipment, but you need funding also for people to make effective use of that equipment.

The Chair: Or maybe you shouldn't buy the equipment. Just kidding.

Dr. Don McDiarmid: Don't get me wrong, the community appreciates the money the government has put into research in the last few years.

Ms. Sophia Leung: You did comment about the CIHR, and there's big funding there too. Has your group utilized that?

Dr. Don McDiarmid: Those who are in that area of research have.

But it's interesting that in the U.S. the National Institutes of Health underwent a large increase, and the previous head of it has subsequently come out and said that if you want the health research to remain dynamic—this is speaking to his own government—you must begin making increases in your grants to the physical sciences, because they underlie other things and produce results that are ultimately very useful and necessary to continue the health research. So it's a balance again between disciplines, as well as between equipment and researchers.

Ms. Sophia Leung: Madam Gray, in your recommendations you suggest an increase in CHST by $1.1 billion to $19.8 billion. That's 18% or over, quite high. We do try to upgrade the CHST transfer. In the meantime do all the urging you need. I just wonder in what way we, the federal government, can persuade the provincial governments to allocate all the funding to the specific urgent needs. We certainly would support that. Do you have any suggestions?

Ms. Sharon Sholzberg-Gray: First, I want to distinguish our recommendation regarding the increase in the cash floor to the CHST. Our 21-page brief notes very carefully that our calculations were based on the fact that we thought the increases should have taken place in the year 2000-2001, through the federal-provincial agreement of September 11. The new CHST money didn't start flowing until April 1, 2001. So we anticipated that base, and then added less than 3% for inflation and 0.8% for population growth—we were off—and we came to a particular figure for next year. I think it was a reasonable amount. We thought CHST shouldn't be left to fall behind. That's why we want an escalator, and we didn't think the appropriate base had yet been established.

As for those targeted and urgent funds, we thought that was the way to try to achieve some of the objectives we all want to achieve in respect of system change. It's easy to monitor specific targeted funds. They have rules attached to getting them. They have rules with respect to reporting, rules with respect to accounting back on the results of the use of those funds, and that kind of thing. So I think that's quite easy.

I don't know whether the provinces like targeted funds or block funds, which is a whole other issue. I guess some might like targeted funds, because they have urgent needs to be met. It's perfectly appropriate, for instance, to insist that the medical equipment fund, which includes diagnostic equipment, be used for that kind of equipment and that the provinces report back on exactly what equipment they've bought—that's the nature of the fund. If there's a particular fund on palliative care and there's a particular fund on primary care reform, reporting back, it seems to me, makes sense. I think when you have targeted, transitional, or special funds, it's easy to report back.

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On the whole issue of big block funds, frankly, we warned the federal government when it introduced the big block funds some years ago that it might not be the way to go and it might be better to have specific transfers, which would create greater accountability. But that's still an issue, it seems to me, that's up for discussion in the future.

Right now the CHST has so many things in it, post-secondary education, social services, health, some of which have national standards, some of which don't. When additions were made to the CHST over the last couple of years, sometimes it was announced that they were supposed to be for health, sometimes it was announced that they were supposed to be for health and education. The reality is they can't be for anything. They are block funds, they go into the consolidated revenue fund of the provinces. The provinces can use them for health or use them for tax cuts or that kind of thing. The only condition attached to those funds is that the provinces comply with the Canada Health Act, even though the funds cover three types of things, post-secondary education, social services, and health.

So it seems to me that we might want to review this in the future, talking about long run. HEAL, by the way, the Health Action Lobby, which isn't here today, commissioned a paper on mechanisms. Depending on what objective you want to achieve, there could be a different kind of mechanism for transfer, a big block fund, a targeted fund, the tax system, all kinds of things. It seems to me that mechanism issue has to be reviewed at some future date.

The Chair: We'll check with the researchers, but we don't have that document.

Ms. Sharon Sholzberg-Gray: Do you want the mechanisms document as well?

The Chair: You're mailing us the other one, could you mail this?

Ms. Sharon Sholzberg-Gray: Okay.

The Chair: Thank you.

Mr. Cullen, five minutes.

Mr. Roy Cullen (Etobicoke North, Lib.): Thank you, Mr. Chairman. Thank you, presenters.

I have a couple of questions for Ms. Sholzberg-Gray, but I don't know if I'll have time for both of them.

First, Dr. Service, when we have the research community come to this committee and talk about the indirect costs of research, I must say it makes my blood boil. The federal government has put up the research chairs, which have an overhead component. We put up the $3.4 billion my colleague mentioned for the Canada Foundation for Innovation, and in legislation that went through this committee last year we provided for overheads to be included in some of that. So these are the professors. This is the infrastructure. We've increased funding to the various granting councils.

I hope you're taking this message to the provinces, because if the provinces, after we put up this money to support research in Canada, can't come up with some rum and rations to support that, it's a sad day in Canada. I think your recommendations are misdirected. They should be at the provincial governments and the territories, not the federal government.

I don't know if you want to react to that.

Dr. John Service: I just came back from a meeting from the CMEC. We have sent our brief to every provincial capital, not only the minister in charge of post-secondary education, but those with responsibilities for innovation. We do try to influence the provinces, but we are a national consortium, so we relate more to the federal government.

I find the same kind of frustration, I think, that you do when you see your money—I'm assuming you're from Ontario—being spent by your buddy Mike Harris on tax cuts, when it should be going to universities. It makes my blood boil too. But for us, you see, the federal role includes what you've traditionally done, and there's nothing in this document that is not stuff of past federal governments in their federal role. It is clashing with federal-provincial issues, that's true, but you've always taken an interest—for 20 years, I don't know how long—in the core funding of universities. You've always done that. The one new piece is on indirect costs, but you've taken some initiatives on indirect costs on targeted programs, like the CFI—you're absolutely correct—and the chairs. All we're saying is, that's an excellent idea, let's spread it out, because, again, that would be an important role for the federal government, and it is a very important role for research.

Mr. Roy Cullen: With respect, I would just say that tactically, it's sort of, you've done this, you've done that, you've provided that kind of initiative, so we've tried the provinces, but they have, especially in Ontario, their heads in the sand, so we're going to put it back on your table. You might rather say to the provinces, we're not putting it on the table before the federal government; they've done their share, it's up to you now to come up with the rum and rations to support it. When people keep coming back with this administration, the indirect costs of research, I understand why you're saying it, sir, I just think that you should be putting that to the provincial governments and leaving us out of it.

Anyway, I'll move on.

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Dr. John Service: We'll have to agree to disagree.

Mr. Roy Cullen: Okay, that's fine.

Ms. Sholzberg-Gray, I look forward to reading your brief on the public-private mix. I think there is a lot of misinformation, and it will add to that debate. I just glanced through it. In regard to health care, public and private, as a percentage of GDP, I agree with a lot of your premises, that we need a system change, we need stability. But we rank now fourth, I think you say, out of the OECD—there are about 30 or 35 countries in the OECD. I know we always want to be number one, but being number four is maybe not that bad, I would submit. I think those data are from 1998: how would we look now, given the increased commitments in Budget 2000?

Ms. Sharon Sholzberg-Gray: I think actually the figures there are the percentages of GDP that we spent on health care, and that includes both private and public spending.

Mr. Roy Cullen: Yes, I understand.

Ms. Sharon Sholzberg-Gray: We're fourth, and I think people tried to make it look as if they're closer to the bottom than the top. In other words, they want to look as if they spend less on health care sometimes, although I'm not sure what virtue there is in doing that. But I think the really important figures to look at are the public spending part, and if you look further—and I'm sorry, you just got the—

Mr. Roy Cullen: No, I saw that as well.

Ms. Sharon Sholzberg-Gray: In public spending as a percentage of the GDP we're number nine, which means we're not one of the biggest public spending countries in the OECD, and when you look at the proportion of public and private, we're down at number twenty-one. In other words, most OECD countries have a larger public sector in health care than we do. We're 70-30, the average OECD country is 76-24. Their proportion of public spending is higher than ours. We're twenty-first as we compare ourselves to some 28 or 29 western countries.

So we're very low on public spending compared to OECD colleagues. That's really the point I was making.

Mr. Roy Cullen: The reason I raised it is that I think it's often used as a proxy. People will say we don't spend enough on health care in Canada if it's consuming that much of our GDP. I understand the difference between the public and private expenditure, but we're still ranked right up there. It seems to me I've seen other studies that say we're spending a lot on health care in Canada collectively, but we're not spending it very well.

That brings me to your point about system change, and one of the things that boggles my mind is the way we rationalize capacity in the health care system. You talked about the continuum, an acute care bed down to meals on wheels. We've seen cases in the health care system with institutional care where the institutions are closed and community programs are not put in place. We see elderly people in acute care beds, and that hasn't changed in the last 25 or 30 years, to my knowledge. I think we've clearly made some improvements with day surgery and a whole host of things, but we're still not investing in the preventive or promotion programs that you cite.

We have a lot of bright people in the health care system. Why can't we get the capacity rationalized more optimally?

Ms. Sharon Sholzberg-Gray: First, it's not the responsibility only of the health care managers and trustees, it's the responsibility of government as well. Provincial governments allocate money for particular goals and objectives.

That brings us right back to the public-private mix, by the way. We only spend 6.3% of our GDP on public health spending, the United States spends 6.5%. So just to go back to that, they actually spend more on their public system than we do on our public system. They just don't get as good a bang for their buck. They don't get universal coverage for that 6.5% of their GDP they spend on the public side, they only get some care for the elderly and for poorer groups. So that talks about efficiency, I think.

But to go back to the issue of why we aren't moving, for instance, to more long-term care beds, instead of people using acute care beds, it's interesting, because it brings us right back to the public-private question. Long-term care is still largely a private sector part of our health care. Somehow, market forces have not been able to supply the number of long-term care beds we need, so government has to come in and either help charitable groups or community groups build the long-term care beds or encourage the private sector to build them and subsidize them and give per diems, and it isn't working. In most provinces there aren't enough of those beds. Of course, on the other side, there's a wide variation in co-payments and long-term care across this country, an issue that has to be resolved.

So I think one of the reasons we aren't getting from A to B is that we haven't figured out, as a country, what the government role should be in the non-Canada Health Act services, namely long-term care, pharmaceuticals, home care, community care, all the things you're talking about. We don't have any national objectives in that area, we don't have any national objectives in regard to who should fund, who should deliver, what access should be, where the role is for private sector delivery or co-payments.

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The bottlenecks in our health service, interestingly enough, are those for which private solutions can be achieved, but obviously they aren't satisfying a need, so we have to have public solutions there, and we have not, as a country, come to those public solutions. Individual provinces try to tackle the problem in different ways, and some of them are better at it than others. You're right, that's where the challenge is. We're not getting there because different governments have different ideas of where we ought to be going in those areas.

The Chair: Thank you very much, Mr. Cullen.

Mr. Nystrom, final question.

Mr. Lorne Nystrom (Regina—Qu'Appelle, NDP): I want to welcome everybody here. I have two specific questions for Ms. Gray.

First, what do you recommend as the best balance for federal-provincial spending on health care? It was 50-50 in the 1960s when medicare was first brought in, then it went down to roughly 13% or 14% by the federal government and 87% or 86% by the provinces. What is your recommendation to our committee as to what the appropriate spending should be? What should our target be, what should our goal be in respect of that spending? The 1995 budget, of course, really slashed back on the federal commitment and put a lot of the burden on the provinces, and you've already mentioned that with regard to the 1990-1997 period.

The other question concerns the GST. I find that very interesting. Maybe you can elaborate a little on why isn't that done? I was on this committee back in 1989-1990 when we were looking at the GST and bringing it in, when we had the big battle with Michael Wilson, and so on. The question was what we do with the public sectors, universities, hospitals—we could call them the mush sector—municipalities, and so on. So what is the government spending on trying to administer the mess we have today, and how much would we save. Would there be revenue neutrality beyond the administration costs, Ms. Gray, if we went to what you are suggesting? I think what you're saying makes an awful lot of sense.

Those are my two questions, the appropriate amounts from the federal government and the provinces, and then the GST.

Ms. Sharon Sholzberg-Gray: On the appropriate balance, there are many misconceptions and much misinformation. When we originally had the 50-50 shared cost program for medicare, remember, it was only to cover hospitals and physicians. And hospitals, by the way, are a much lower percentage of the health care budget today than they used to be. They're only 32% of the health care budget, they used to be 45% 20 years ago, and they're taking care of many more people because of technological innovation, day surgeries, and all the things we talk about. So they are a smaller percentage of the health budget.

But to go back to the 50-50, that was the hospital and physician costs. Now, of course, we look at the entire spending of every provincial government in health care, including pharmaceuticals, long-term care, home care, community care services, all the services they have added and correctly provide to their populations, and we've said the federal government isn't covering 50% of it. That was never the original deal, so we ought to be truthful there.

Second, we know that in the late 1970s the federal government took half of its cash and converted it to tax point transfers to the provinces. One could have argued at that point, 20 or so years ago, that the very next day the federal government cut its contribution in half, but I don't think anyone would say it did. Similarly, if tomorrow the federal government—I think it would be a mistake—converted half of its cash to tax points, one would not then argue that they've cut their contribution in half.

So I think the truth of the matter is that the federal government is probably funding about 30% of the health care costs in this country, if you include the tax cuts. Whether that's enough or not is an interesting issue. I think their proportion should go up, so they'll have the moral authority to assert national standards and comparable standards. It seems to me also that the federal government, together with the provinces, can't establish, at the very least, national objectives in non-Canada Health Act services unless they contribute more money to those services in an open way, perhaps through a separate act, the Canada Home Community and Long-Term Care Act, or something like that. So I think it should be higher than it is, but it's nowhere near as low as the provinces claim.

You also mentioned the shifting burden from the federal government to the provinces for health care. I think it's important to say here that all levels of government cut; it wasn't only the federal government in the 1990s, it was everybody together. Some provinces, in fact, were leaders, that is, they cut before the federal government even dreamed of cutting.

But we won't go back to the 1990s, because we're looking to the future, to the 21st century, and we're saying the federal government ought to have a higher share than it has currently. But it's come a long way towards meeting what we proposed some years ago. Our brief says it's met about two-thirds of the objectives we put forward a year or two ago, but there's more to do. There's still some unfinished business, but not as much unfinished business as there was a couple of years ago. The unfinished business now is system change and the funds to drive that system change.

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To go back to the GST, this is a policy issue, it will have to be in a budget to be resolved. Health reform has blurred the definition of hospitals. Hospitals are now places where you get day surgery or all kinds of out-patient services, and there are those who originally defined hospitals as being places where you have overnight beds. If you're only going to give an 83% rebate to the traditional definition of a hospital, what you're essentially doing is taking today's hospitals and increasing their tax liabilities. It seems to me that's inappropriate.

As well, long-term care facilities have people with very high-level needs in them today. Remember, they're inappropriately using, very often, acute care beds. If you put them into a long-term care bed, they still have those high care needs. For their GST rebate to be 50% or 57% doesn't make sense in the context of current health care needs.

Right now there are six hospitals and regional health authorities being audited. I have no idea what government auditors make, but that's costing money, that's costing time. The hospitals and regional health authorities are hiring accountants, outside advice, and they're also using their internal financial people to go through the audits. If the auditors find that hospitals are really not hospitals or that hospitals are merged with long-term care facilities and ought to be tracking their purchases, and some things should get a 50% GST rebate and some should get 83%, going through that doesn't make sense, because at the end of the day, I'm going to come here on behalf of those hospitals and long-term care facilities and home care agencies and say, you give us more money to cover the cost of the extra GST we're paying. All of this doesn't make sense, that's what I'm trying to say.

We presented a written brief on it to the three ministers in question in January 1999. We followed up through correspondence. We do have a letter dated April from the Minister of Finance saying he'll have his officials review it.

I think it's a more complex issue for other parts of the health continuum, because the issue is, what's the status of private sector long-term care facilities? They want a GST rebate also, and they don't have any, not 50%, not 83%. Then there's the question of physicians in private practice. They don't have a GST rebate, and in fact, they absorb the cost of GST, because they can't pass it on to patients—obviously, that's not the way we bill for medical services.

To quantify the matter, the total gross GST take from the hospital sector is some $380 million. After the rebate it's $60 million or so. I don't know why all this work has to be done for those sums of money, which we'll then come back and ask the government for.

Mr. Lorne Nystrom: It's interesting how much we spend to collect that $60 million.

The Chair: You don't have a report on that, do you?

Ms. Sharon Sholzberg-Gray: Actually, we did—it's two years old, but it's still valid.

The Chair: Thank you very much, Mr. Nystrom.

On behalf of the committee, I want to express to you our sincerest gratitude. We value your input as we get ready, after we do a couple of weeks of travelling, to write a report to the Minister of Finance. You certainly have given us food for thought, and at this hour it's a good thing.

Ladies and gentlemen, the meeting's adjourned.