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Canadian health system too expensive: report

By Claire Sibonney

TORONTO (Reuters) - Canada's public healthcare system is becoming too expensive but could offer better value without drastic cuts or abandoning its state-funded structure, one of the country's most influential economists said on Thursday.

Changes needed include more treatment of patients outside of hospitals -- through family doctors and home care, for example -- and by offering more private services paid for by the public purse, said Don Drummond, a former Toronto-Dominion Bank chief economist and federal finance official.

Drummond, who has been hired by the Ontario government to advise it on program spending, said in a report that politically "palatable" options are needed to tackle the threat of ballooning health care costs.

"If healthcare spending keeps the provinces' backs to the fiscal cliff, they might once again lash out with spending cuts, as they did in the 1990s," Drummond warned in the report for the market-friendly C.D. Howe Institute, a public-policy think tank.

"But a lesson should be learned from that episode: little was really solved ... the experience left the public even more leery of moves to save money or raise efficiency."

Healthcare in Canada is delivered through a publicly funded system that covers all "medically necessary" hospital and physician care, as well as prescription drugs for seniors, and curbs the role of private medicine.

While the system has widespread public and political support, costs have soared well above the rate of inflation and are expected to climb further as the baby-boom generation ages.

Drummond said other ways to save money include allowing nurses and physicians' assistants to perform some tasks done by doctors and enabling pharmacists to write basic prescriptions.

Policymakers should also contain drug costs and change the way doctors are paid, with more emphasis on salaries and less on fees for services. He also urged lower fees for procedures where technological advances have made them quicker, such as cataract surgery.

But doctors should receive incentives when they find ways to improve the quality of care, such as lowering the number of complications after treatment, he said.

Drummond noted that Canadians spent C$192 billion ($186 billion) on healthcare in 2010, or 11.7 percent of gross domestic product. In Ontario, Canada's most populous province, the health-spending share of GDP was even higher at 12.2 percent.

Of the 34 countries covered in the latest OECD health data, Canada had the 7th most expensive system. The United States topped the list at 16 percent of GDP.

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