Cost control, equity and efficiency: can we have it all?

Abstract

On March 1, 2006, the Government of Ontario enacted the Local Health System Integration Act, which created 14 Local Health Integration Networks (LHINs) (2005, 2006). These organizations are charged with strategic purchasing; they will not directly provide services. Each LHIN is responsible for planning, integrating and funding healthcare services in its region. About two thirds of Ontario's healthcare budget is allocated to LHINs (Ministry of Health and Long-Term Care 2006a), which are required to achieve cost control and promote equity and efficiency (Canadian Health Care Manager 2005). LHINs must also respond to local needs and priorities and implement province-wide priorities (Ministry of Health and Long-Term Care 2006b). Ontario's Ministry of Health and Long-Term Care (MOHLTC) (2006c) emphasized that the goal of LHINs is to "restore equity to Ontario's health care system, ensuring quality care for every patient, in every community, in the province." The Ontario Hospital Association (2005), meanwhile, identified achieving efficiency and equity in hospital funding to be the crucial issue. The health systems of Ontario and England are becoming increasingly similar in seeking cost control, equity and efficiency. The acts that created the National Health Service (NHS) in the United Kingdom (UK) in 1948 and medicare in Canada in 1966 aimed to provide equity of access to healthcare according to need through universal coverage that is financed by taxation and free at the point of delivery (Klein 2006; Tuohy 1999a; Marchildon 2005). There were, however, two key structural differences between the creation of the NHS in the UK and medicare in Canada. In the UK the government nationalized independent hospitals, brought local authority hospitals within a national system and revolutionized arrangements for paying hospital specialists by making them salaried employees of the NHS (but not direct employees of hospitals) (Klein 2006; Webster 1988; Forsyth 1975). In Canada the federal government limited its role to being an insurer. It also did not change hospitals' independent status nor did it alter arrangements governing the paying of hospital specialists on a fee-for-service basis (Tuohy 1999a). From 1991, however, the Thatcher government in the UK (Department of Health 1989) and - following devolution, which created a different NHS in each of the countries of the UK (Greer 2004) - the Blair government in England (Department of Health 2002a) have sought to move the NHS toward the Canadian model. Under this revised framework, ministers are responsible only for insurance by giving NHS hospitals greater independence from central controls and encouraging pluralism (Klein 2006; Department of Health 1989, 2002a). A report from the Ontario Hospital Association (2005: ii) recommended England's current regional form of regional health authority - Strategic Health Authorities (SHAs), which were created in 2002 - as a model for Ontario's LHINs. In the next two sections of this paper I show that, although the English NHS has always achieved cost control by using a budgetary cap, there have been serious difficulties in the design and implementation of policy instruments intended to achieve two other desiderata: a more equitable distribution of resources and improved hospital performance. I conclude by raising questions about the current models of strategic purchasing in England and Ontario, questions that are intended to help policy-makers find ways to achieve these objectives