For a Strong and Resilient Post-COVID Health Care System – Reforms to Expand Surge Capacity

Research Paper showing how Canada could better fight the next pandemic by increasing staff, space, and medical resources through institutional reforms

Our health care system is hard-pressed to withstand the repeated blows of the pandemic. One of the issues highlighted by the health crisis is the urgent need for more hospital beds, as Canada lags behind many other countries in this regard. This research paper prepared by Peter St. Onge in collaboration with Maria Lily Shaw, proposes some concrete solutions.

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This Research Paper was prepared by Peter St. Onge, Senior Fellow at the MEI, in collaboration with Maria Lily Shaw, Economist at the MEI.

Highlights

The COVID-19 pandemic has strongly amplified the sense of crisis regarding Canada’s health care capacity, which remains mediocre despite consistently high spending over the years. This lack of capacity has pushed policy-makers into a corner, forcing them to take risky gambles that dramatically worsened the toll in Canada, in terms of economic devastation and, ultimately, in terms of actual deaths. Case studies from other countries suggest that Canada could quickly ramp up surge capacity with institutional reforms that would not require long-term investments. However, time is of the essence.

Part One – Keeping Cases Low to Avoid the Lockdown Dilemma

• Taiwan, South Korea, Japan, and Hong Kong have kept cases low by using traditional public health tools in a focused and competent manner, while avoiding the generalized lockdowns that have caused Depression-level unemployment and social disruption in Europe and North America.
• Very early in the pandemic, Taiwan began screening, and then quarantining, travellers. All arriving passengers had their temperature checked at the airport or, in the case of high-risk origins, by officials boarding planes.
• All international visitors, Taiwanese or foreign, were banned from taking public transportation, instead having to take “epidemic-prevention taxis” to get from the airport to their quarantine location.
• Before having confirmed even a single domestic case, Taiwan was already requiring hospitals to test anybody with symptoms. Health officials then traced and isolated people with whom the patient had come into physical contact and quarantined them, under penalty of a large fine.
• Taiwan’s domestic mask production was quickly increased to 5 million masks per day, and eventually to 20 million, for a country of 24 million, to the point that it began to donate millions of masks to other countries.
• Industrialized Asian countries did not close schools, and even left restaurants and bars open, with adjustments to limit risk. A tailored policy meant that the vast majority of students could continue their studies, and their parents could go to work, with the flexibility to stop individual outbreaks.
• Cross-country comparisons suggest that no Western country was even remotely well prepared for the pandemic. The consequences of lockdowns have been economically catastrophic, throwing millions into unemployment and bankruptcy, in addition to increased instances of depression and suicide, and the health effects of delayed non-COVID-19 medical care.
• If effective and relatively straightforward tactics had been used in Canada, Europe, and the United States to control the pandemic when it first started to spread, devastating lockdowns would likely never even have been considered.

Part Two – Expanding Surge Capacity

• The next line of defence before turning to economically catastrophic lockdowns is expanding the capacity of the health care system in a crisis, quickly increasing staff, space, equipment, and funds.
• For example, Singapore gave authority to individual hospital administrators to flexibly deploy resources for rapid response, and despite an enormous caseload, its death rate from COVID-19 was just 5 per million, nearly as low as Taiwan’s and less than 1/100 of Quebec’s.
• Ultimately in Singapore, 18,000 beds were created for the isolation and care of COVID-19 patients, with preparations for another 23,000, in a country of under 6 million people.
• In contrast, Canada has performed quite poorly during the pandemic, not only displaying an unremarkable ability to expand capacity, but also severe bureaucratic inertia when it comes to repurposing the resources that already exist within the system.
• Far from a well-established 85% international benchmark for occupancy, Canadian hospitals routinely exceeded 100% capacity before the pandemic, and Canada has one of the lowest rates of hospital bed availability in the OECD, at 2.5 beds per 1,000 population.
• This lack of capacity led to the disastrous policy of clearing out hospitals, notably by transferring COVID-infected and vulnerable patients into similarly overburdened elderly homes. This in turn contributed to 81% of Canada’s COVID-19 deaths occurring in long-term care centres, almost double the OECD average.
• As another consequence of this lack of capacity in the face of extreme projections by health experts, thousands of scheduled surgeries were shelved at the end of March.
• Beyond the horrific death toll, the second major category of collateral damage from fears about capacity has been the lockdowns themselves, as the entirety of Quebec society, from jobs and livelihoods to children’s educations, became an afterthought to health care capacity.
• It is important to note that Canada’s lacklustre surge capacity is not the result of budgetary cuts. Health care spending in Canada is one of the highest among universal systems, and nearly 30% more per capita than the OECD average.
• Moreover, spending has risen substantially in recent decades, growing faster than the economy. The CIHI estimated 2019 health care spending at 11.6% of Canada’s GDP, up from around 10% in the early 2000s, and just 7% in the 1970s.
• Public health costs have grown to fully 37% of provincial budgets in 2016—up from approximately 33% in 1993—and have been projected to climb as high as 42% by 2030.
• These figures suggest that spending is not the issue, and that structural reforms are required to address Canada’s weak surge capacity.

Reform 1: Activity-Based Funding

• A key feature of Canada’s health care system, and one of the sources of its problems, is the use of the “global budget” funding mechanism based on historical budgets, or worse, political lobbying.
• The main alternative to global budgets for universal systems is activity-based funding (ABF), which means the funds follow the patient and hospitals have a built-in incentive to do what they’re supposed to do: treat as many patients as they can, at a level of quality that maintains their good reputation.
• By increasing efficiency, ABF reduces waiting lists, increases quality of hospital stays, and enhances the transparency of hospital activity as hospitals seek to attract more patients.

Reform 2: Decentralization and Liberalization

• During the COVID-19 crisis, inflexible rules and irrational regulations conspired to tie administrators’ hands such that they had difficulty allocating resources, including even just hiring the staff they needed.
• Staffing shortages became especially problematic during the worst months of the crisis. At one point in early May, some 11,600 workers were absent from Quebec’s already short-staffed health care system.
• Ontario unions called for work stoppages amid the worst of the pandemic in order to fight emergency liberalization allowing staffing decisions based on patient need rather than seniority.
• Administrative flexibility across the board, based on decentralization and liberalization, is essential going forward for Canada to be far more agile in the smart use of its health care resources in future crises.

Reform 3: Expanded Use of Existing Resources

• The two largest groups of underused health care professionals in Canada are nurses and pharmacists, while the single largest underused technology is telemedicine.
• Not only should COVID-related deregulations be made permanent, but a proper review should be made of which conditions nurses of varying levels, as well as pharmacists, are perfectly qualified to diagnose, prescribe for, and treat.
• Beyond COVID-19, the current liberalization of telemedicine should be maintained so that Canadians continue to have improved access to general practitioners and specialists without having to languish so long on waiting lists.

Reform 4: Entrepreneurial Health Care

• Given historic public deficits as a result of COVID-induced lockdowns, there is even greater reason to look to the private sector to lend a hand by allowing more entrepreneurial participation in health care.
• Opinion polls have found that a substantial majority of Canadians favour more private provision of medical services, as long as medically necessary care is paid for by the government.
• Privately managed care that is free to the patient when medically necessary is increasingly the standard across high-performing universal health care systems in Europe and elsewhere.

These four reforms are notable in that they do not require tens of billions of dollars in new government spending. Rather, these are commonsensical administrative reforms that simply involve standing up to special interests that have long alienated Canada’s health care systems from the patients they are meant to serve. Without reforming management and adding flexibility, we will not have fundamentally transformed our ability to respond to the next crisis.

There is a large gap between what Canadians expect from their governments and their health care systems, on the one hand, and how these have performed in the face of the COVID-19 pandemic, on the other. We will never know how many lives could have been saved with more flexible and efficient health care, but we can certainly improve our preparation for the next crisis.

European experience has demonstrated that the health care reforms described in this study are consistent with a universal and publicly financed health care system. Moreover, such reforms are popular among Canadians. It is high time to fundamentally repair the dysfunctional health care system that failed to protect many of our most vulnerable despite the very best efforts of our heroic medical professionals.

Introduction

During this year’s COVID-19 crisis, a persistent concern for Canadian policy-makers has been the ability of the long-overburdened Canadian health care system to handle the pandemic. This fear has led to policies that dramatically worsened cases, deaths, and economic carnage from COVID-19. Fixing this should be among the top priorities of policy-makers across Canada, and especially in Quebec.

What follows is based on events and data current as of August 2020. The situation, and even the data related to COVID-19, is in constant flux. For example, six months into the pandemic, the UK revised death estimates downward by 11% due to a change in how deaths are coded,(1) while New Zealand announced a new outbreak after roughly 100 days without a single case.(2) COVID-19 is an evolving pandemic and the response has involved novel policy tools, and so there can be no doubt that the data will change over time, possibly substantially. The best we can do is to draw lessons from the data as it stands, and continue to assess new data going forward.

Since the start of the pandemic, the single most salient feature of Canada’s COVID-19 crisis has been that, for many years, hospitals and clinics across Canada have experienced shortages, perennially packed to or beyond capacity. This has led to waiting times stretching to many months while patients suffer, or pay out of pocket for treatment abroad in desperation. Sadly, this situation has been the reality for decades. This state of affairs is inconceivable in European universal systems with more tolerant attitudes toward entrepreneurial providers and insurers.

The pandemic has strongly amplified the sense of crisis regarding Canada’s health care capacity, which remains mediocre despite consistently high spending over the years. Indeed, we believe this lack of capacity has pushed policy-makers into a corner, forcing them to take risky gambles that dramatically worsened the toll in Canada, in terms of economic devastation and, ultimately, in terms of actual deaths. The lack of capacity not only pushed governments to maintain lockdowns longer than was necessary, but the sense of panic also gave rise to a disastrous policy that consisted of clearing out the hospitals, notably by transferring COVID-infected and vulnerable patients into similarly overburdened elderly homes. This has contributed to a greater rate of COVID-19 deaths in Quebec than in the rest of Canada, indeed a death rate per million that, were Quebec a country, would be among the highest in the entire world.(3)

Part One of this paper will begin by profiling countries that kept cases low. Particular emphasis is focused on Taiwan, at this point world-renowned for its thorough and competent policies to minimize COVID-19 cases.(4) With a population of 24 million, of whom over one million live in China (including Wuhan) and travel back and forth between the countries, Taiwan nevertheless managed, through an energetic and innovative basket of over 100 policies, to limit the disease to just 481 cases and seven deaths as of August 12.(5) Meanwhile, Canada, with just 60% more people, suffered 120,000 cases and nearly 9,000 deaths in the same period.(6)

South Korea and Japan enacted similar policies to Taiwan’s, also achieving results that were very impressive, although Taiwan has become the gold standard in terms of outcomes. Notably, none of the above-mentioned countries enacted generalized economic lockdowns such as those that were popular in the West, including in the US and Canada. Taiwan, South Korea, and Japan kept schools and restaurants open, even bars and major league sports. Each country carefully tailored mandates and regulations to their specific risks, achieving through this “surgical” approach far superior outcomes without the Depression-level economic devastation the West has inflicted upon itself.

Unfortunately, no developed Western country has come close to these results. Australia and New Zealand have gotten attention and plaudits for their low case numbers, yet their policies have not stood out in any particular way except for early and strict travel bans. Indeed, increasingly it appears that the modest COVID-19 numbers in those regions may have simply been due to those travel restrictions, suggesting limited relevance for countries like Canada that are not islands. The rest of the West has, to a degree that surprised many experts, had similar case numbers whether or not lockdowns were enacted. We will review academic studies on this subject, and explore implications for future “waves.”

In Part Two, we examine surge capacity as the single most urgent reform needed for Canada’s health care system. Surge capacity refers to the ability of a health care system to rapidly increase staff, space, and medical resources to respond to temporary needs. Every country has some degree of surge capacity, often optimized for natural disasters or terror incidents, but Canada’s ability to surge during this pandemic has been very mediocre. In the context of perennial health care shortages, this mediocrity has proven catastrophic, bringing the cost of capacity shortages very clearly, and very tragically, into focus.

The good news is that case studies from other countries suggest that Canada, and Quebec in particular, could quickly ramp up surge capacity with institutional reforms that would not require long-term investments. The bad news is that we may have a very small window of opportunity given the second wave that has now begun, and indeed, the possibility of subsequent waves of COVID-19 accompanying the influenza season.

Read the Paper in PDF format