Economic Briefing Notes

Answer

Economic Briefing Notes

Issue: Balancing Affordability and Sustainability

In the face of anticipated changes in the demand and supply for healthcare services in Canada, it has become necessary for policy makers to engage in debates on how to ensure that the healthcare system remains affordable and sustainable. This is in the face of projected increase in public health expenditure by 31% to cater for increasing population (Fierlbeck 2016). It is also reported that the ageing population will be higher by 2020 thus demanding higher expenditures. Inflation and general economic dynamics are bound to create an aggregated effect on public and private health care costs by approximately 5% by 2020.

Background/Situation Analysis

• The delivery of healthcare in Canada is mainly funded by the government through Medicare.
• There are additional services provided by private entities
• Funding and healthcare expenditure are governed by Canada Health Act enacted in 1984.
• The government spends approximately 11.4% of the countries revenues on healthcare services yearly.
• Currently, the government is focused on addressing challenges facing quality healthcare delivery.
• The most pressing issues facing the healthcare system is long waiting time especially for medical appointments, lack of long term care and absence of coverage for prescription drugs as well as the lack of competitive practices (Picard 2017).
• CIHI cites that the long wait time is a result of fewer physicians per capita of 2.2 per 1000 population compared to other developed countries.

Economic Analysis

• An economic analysis of the health care situation in Canada explicates various points. First, the lack of focus on balancing and optimizing economic forces of demand and supply where the demand for services exceeds supply. This causes longer waiting time and poor services.
• The current system defies economic principles of a free economy where service delivery and associated costs are supposed to be dictated by forces of demand and supply. Currently, the Canadian healthcare system prohibits or limits private healthcare. This creates laxity among public healthcare providers due to lack of competition.
• Public healthcare provision is a consumption activity thus, for a government to balance affordability and sustainability, it is necessary to operate either a free market economy or a mixed market economy, instead of the current command economy.
• Macroeconomics details per capita spending and gross domestic product which are essential parameters for ascertaining the productivity of a government funded service. Lorenzoni et al (2014) report that government expenditure has been increasing since 1975 yet the system is still unsustainable and expensive compared to other developed economies.
• This creates a need for a cost benefit analysis where economic data can be collected to guide policy making in order to enhance affordability and sustainability.
• This relates to the economic concept of cost effectiveness and efficiency which will direct policy makers into making policies that enhance productivity. This maximizes return on investments.

Risk Analysis

• The most probable risks to be addressed include inflation risks where inflation could lead to adverse impacts on revenue collection and government expenditure (Walsh 2017). Such risks will shrink the government’s ability to deliver quality healthcare.
• Political risks also threaten decision making where politicians lobby for policies that contradict economic principles and theories. This will lead to ineffective healthcare policies.

Option Analysis

• There is the option of managing inflation by adopting expansionary monetary policies (Walsh 2017). These policies will help sustain government revenues, making it easier to budget.
• Government needs expansionary economic policies to promote private investments in healthcare to provide competition to public healthcare.
• Restructuring healthcare provision. Unlike other countries where nurse practitioners, occupational therapists and other medical staffs are actively involved in the process, Canada over relies on while underutilizing other medics (Picard 2017). This calls for internal restructure to include other medics in reducing wait time.

Assessment of the Proposal

• The provision of public funded health care services is a complicated process as it is the case with Canada. The government needs to ensure affordability and sustainability as part of the return on investments.
• As a result, it is necessary to consider the economic theory when making financing and funding decisions. For instance, the government has to consider the forces of demand and supply, and their impact on free market or mixed economies. The case of Canada demands the application of either of the market economies, where private investors will be allowed to invest in providing private medication. This will not only ease the current demand that surpasses supply but also ensure create competition.
• In order to achieve this, is necessary that the government eases economic factors by adopting expansionary policies. This will expand money supply and encourage economic growth. It will combat inflationary price increases and also increase disposable income thus enabling more people to spend on private healthcare (Galí 2015). The overall effect will be seen in the increased productivity of the health care system and ultimately, balancing of affordability and sustainability in provision of healthcare.

Personal Recommendations

• Based on the economic theory, it is necessary that the government allows the healthcare sector to be run and managed as a free or a mixed economy, where government control is minimal (Walsh 2017). This will ensure competition, which leads to consideration for increasing efficiency and effectiveness.
• It is also recommended that the government adopts expansionary fiscal policies. These macroeconomic policies curb instances of inflation while also increasing supply of money. This makes it possible for people to invest.