Ontario Budget Debate Ignores Taxes and Billions Transferred to For-Profit Corporations

Ontario’s budget debate may be high profile, but it misses two essential points.

With the NDP signaling NO TAX INCREASES (on the middle class) a serious discussion about taxes, particularly the need to increase corporate and wealth taxes, will not take place. It is hard to have any serious budget discussion without considering the income side. Many commentators have made this point.

At the same time, the expanding use of for-profit companies, often multinational conglomerates, to deliver and finance public services, is being ignored. The negative impact of private delivery on cost, quality, accessibility and democratic control of public services has been well documented and may be the most destructive government expense.

The exact amount transferred to for-profit corporations is unknown. This secrecy, by itself, is a strong democratic argument against the use of private companies. Yet, a quick look at the public accounts for the Ministry of Health shows well over one quarter of that budget is paid directly to private for-profit companies. The easy pickings for large payments to for-profit providers in health care are:

Pharmaceuticals – 4.6 Billion Dollars

Only about 2% of the Ontario Drug Programs budget is used for administration. The rest is transferred to large drug store chains and then much from there to the pharmaceutical conglomerates. The $4.6 billion figure includes $414.5 million that is paid to hospitals, Cancer Care Ontario and the Trillium drug plan which is also primarily transferred to ‘Big Pharma’.

Long Term Care (LTC) – 2 Billion Dollars

The Canadian Union of Public Employees estimates that in 2010 fifty-three percent of LTC beds were in for-profit facilities. $2 billion is low because some of the non-profit homes contract services like food preparation, cleaning and maintenance to private health care conglomerates.

Capital expenses – 1.3 Billion Dollars

Most of the $1.46 billion in the Health Capital account to build, finance, maintain, operate and/or renovate hospitals will be transferred to consortiums of multinational companies or to large private contractors.

Home care – 1.2 Billion Dollars

The Ontario Association of Community Care Access Centers says that 91.3% of the home care budget is spent on direct patient care of which the Ontario Health Coalition estimates 58% of nursing care and 64% of personal support services are provided by for-profit companies.

Medical laboratories – 680 Million Dollars

Over 93% of the medical laboratory services outside of hospitals in Ontario are provided by three multinational corporations. Ontario based for-profit companies provide the rest.

Independent Health Facilities (IHF) – 396 Million Dollars

97% of IHFs in Ontario are for-profit companies.

Physiotherapy, Assisted Devices and Home O2 – 598 Million Dollars

Community physiotherapy services, the Assisted Devices Program and home oxygen providers are primarily for-profit.

eHealth – 291 Million Dollars

The 2010-11 eHealth Annual Report says that 80% of their budget is transferred to public-private-partnerships, in other words paid to large for-profit companies.

Hospitals, Primary Care and Multimillion Dollar Incidentals

Hospitals and primary care are still nominally non-profit. However, significant portions of both their expenses go to for-profit corporations (usually very large ones). Hospitals often contract out cleaning, security, food services, information technology and maintenance. Temporary agencies supply nurses. Consultants and management services are regularly hired.

For-profit chains increasingly provide urgent care services and physician offices. These chains are paid from a percentage of the physician’s billings to the government. Management companies, IT firms and temporary help agencies also receive money from the primary care budget.

Then there are a variety of isolated payments from the Ministry of Health to private corporations: for example, the $56 million paid to IBM and the $35.6 million paid to Sykes International. The Community and Priority Services Program, with a $638 million budget, uses a number of private corporations. And the list could go on – the Ministry of Health’s budget is large and complicated.

In addition to the $11.1 billion itemized above, hospitals, primary care and incidentals probably account for billions more public health care dollars transferred annually to for-profit companies.

The use of for-profit companies is not a small problem even in this single case of the Ministry of Health. Two provincial budget provisions would increase accountability, limit further damage and require no party to directly confront the existing problem of for-profit provision.

1) Detail and publish all payments to private-for-profit corporations, and,

2) Prohibit new use of for-profit providers.

A serious debate on these suggestions would help bring the current budget bargaining back to the big issues facing Ontario’s finances: taxes and private delivery of essential services.

Health Integration: Not in Ontario

I am sure there is a plan to improve health care. There must be: Ontario’s recent budget says it wants to improve integration, control costs and increase access.  Yet Ontario’s provincial budget just does not do it.

The section heading says “Providing the right care, at the right time, in the right place”. Praise worthy sentiments.  The regional governments, the LHINs, responsible for meeting this goal are going to be reformed again to increase their power. But the next point says that routine procedures in hospitals will be shifted to non-profit community based clinics.

The problem is that these clinics don’t come under the LHIN’s mandate; they are not part of the services the LHIN’s integrate.  These clinics are legislated under the Independent Health facilities’ Act and funded directly from the Ministry of Health.  When these services move from hospitals they will join doctors, medical laboratories and over 900 other, mostly for-profit clinics, already outside the LHINs.

So the government is shifting money from hospitals, which are part of an integrated system, making that system smaller, and increasing funding to another separate system of clinics.  The divisions will become deeper and stronger.  Hospitals and the regional governments will become weaker. I do not follow the logic, which means there may be none.

The “poster child” for this strategy is the Kensington Eye Clinic.  This center has worked because it is in downtown Toronto. There is a large local population requiring enough simple eye procedures to support one clinic performing standardized procedures.  But it is an example of how this strategy does not work for Ontario or for health care integration.

The Eye Clinic is outside the regional organizing structure. It does not provide for the movement of staff, or purchasing, or patient records, or money between institutions.   The Doctors in these clinics are among the highest paid in Ontario. And this structure will not work for most communities in Ontario: they are too small. In most communities not integrating all their service in local facilities, usually a hospital, will deprive these communities of needed services.

The one-size-fits-all approach further undermines the LHINs which are supposed to integrate local heath care to fit the needs of each region.  Having a dedicated building for one service may make sense in Toronto and maybe in Ottawa and London. Even in these communities a separate building does not necessarily mean an entity separate from other services.  It could be administratively integrated with a local hospital.  It could be located in unused hospital space and dedicated to that purpose.  There are many options all of which could work in certain situations.  But the province wants it done in only one way, a way that only works for a minority of large communities in Ontario.  This approach does not make sense.

These separate silos with different funding sources force services out of hospitals. This is how it works: the government tightens budgets for hospitals and LHINs so these organizations need to dump expenses.  Then they provide incentives and misleading information to support organizations that fall under a different ministry budget, in this case the Independent Health Facilities’ budget and fee-for-service OHIP payments.  So, like a strong osmotic pressure, work is pulled from hospitals into clinics.  The system further disintegrates.  The ability of local communities to develop the most cost efficient and effective options for their circumstances is diminished.

Part of the political cover for this restructuring is the myth that it is cheaper.  This statement is, at best, misleading. These clinics will do only the simplest cases.  That is there stated mandate. The cost per procedure compared to the average cost per case in a hospital, which includes all the difficult cases, could possibly be cheaper.  But a recent government document found that hip and knee surgeries in a for-profit clinic in Alberta were more expensive than in the public hospitals, so clinics are by no means always less expensive.  Regardless, equating clinics to hospitals is an apple and orange comparison.

If Ontario’s goal is to provide the best local health care and integrated services then the budget does not make sense.