1 week Ago By Michele Jarvie
Rarely is there much reason for optimism regarding health care in Canada. Interminable wait times and limited access to care have become so entrenched that they barely register anymore. One more story of someone suffering on a wait list? Just another Wednesday.
Our collective disappointment in Canadian health care writ large has become as much a part of our national identity as the very existence of universal health care itself. But in Alberta, there is actually cause for celebration at the moment, as Premier Danielle Smith’s government has announced it will reform how hospitals are funded by adopting activity-based funding. While this may sound like an administrative detail, it could directly affect how quickly patients receive care across the province.
Currently, Alberta funds its hospitals using global budgets. This means that at the beginning of each year, a hospital’s budget is predetermined based on the volume of procedures the government estimates it will complete. This fixed-pie allocation is largely based on the previous year’s volume, presuming that it’ll be similar every year.
The result is a single lump sum to stretch across all needs, with little regard for changing demand. This is a little like only stocking two life-jackets on a boat because two people fell in the water last time around. Under this regime, patients become a financial burden, creating a less-than-ideal incentive for rationing care.
That’s why the MEI think-tank has been at the forefront of this debate across Canada since 2012. About a year ago, we published an economic note calling on the Alberta government specifically to move away from global budgeting in favour of activity-based funding. Under this model, hospitals are paid per treatment provided, so the money follows the patient.
This reorients hospital incentives, prioritizing efficiency over simply trying to make it through the year. Hospitals can focus on treating patients in a timely fashion, knowing that the government will compensate them for the work done. Other jurisdictions that have universal health-care systems have used this model to great effect.
In fact, Canada remains an outlier among OECD countries in this regard. Australia adopted activity-based funding 30 years ago. Just a single year after implementation, the volume of care increased and wait lists decreased by 16 per cent, suggesting that Alberta could see improved hospital performance as early as 2027.
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