Voir en Français

Targeted spending in the health system can increase productivity and deliver better results

A version of this commentary appeared in the Hill Times, Winnipeg Free Press, and the Huffington Post

The Ontario government has reached its first test in its efforts to curb compensation costs — freezing and reducing fees for Ontario’s doctors.

The OMA claims that a fee cut will increase wait times. The province’s position is that not raising fees given the budget situation is both necessary and reasonable. A few decades ago, policy-makers were worried that physician compensation in Ontario was out of step with our competition and that we would lose doctors to the U.S. or other jurisdictions that might court our highly trained medical workforce. Policy-makers continue to be concerned about physician compensation being out of step, but this time, in the other direction. Have times changed in Canada relative to the rest of the world? How does physician compensation pay in Canada compare to doctors in other countries?

Comparing doctor salaries across countries can be misleading as the cost of living often differs a lot between countries. Two ways to think about comparing compensation are: 1) converting currencies so that a dollar basically buys the same amount of goods in each (this method is called purchasing power parity or PPP) and 2) compare doctors’ salaries to the average wage earned in that country. Policy analysts use both of these.

A recent paper put out by the OECD suggests that in 2004 Canadian GPs were paid about the same in PPP dollars as doctors in Switzerland and Austria, but less than those in the U.S., U.K. and Germany. Using the comparison to average wages, however, Canadian GPs are among the highest paid in the OECD, just below the United States (3.2 times the average wage versus 3.4 in the U.S.).

Among specialists, Canadian specialists were again among the highest paid in 2004, at almost five times the average salary, although far behind those of the United States, which was 50 per cent higher. There has been substantial growth since these comparisons were recorded in 2004. Over the last 10 years, according to the Canadian Institute for Health Information, physician compensation in Canada has basically doubled.

Canada, as well as every other country in the OECD, has costs that are much lower than those in the United States. So saying that our costs are much lower than theirs doesn’t mean much in the global context. Comparisons with the U.K., however, are potentially more interesting. According to a recent study, while overall health-care spending is much higher in Canada per capita than in the U.K. ($4,079 U.S. versus $3,129 U.S. in 2008), GP physician salaries are considerably lower after expenses ($125,101 U.S. versus $159,000 U.S.). The gap for orthopedic surgeons between Canada and the U.K. is even greater. So the U.K. manages to pay its doctors more while spending less overall. On the other hand, Canada has far fewer physicians per capita than most OECD countries. We’re on par with the U.K. and the U.S. (around 2.4 per thousand in both countries) but below Germany, France, Italy and Spain (3.5 per thousand on average).

How should we think about the relationship between spending on physicians and wait times? It’s difficult to draw absolute conclusions from these spending and price comparisons, but here is what the research reports: countries that spend more tend to report lower wait times. This is perhaps not surprising. Beyond spending more, targeting funds at reducing wait times through activity-based funding is correlated with reduced wait times. Included in this is increased compensation for what physicians do (fee for service) when what they do is aligned with the goals of reducing wait times in specific areas. Simply increasing funding does not. There is little evidence on the relationship between doctors’ salaries and wait times.

Comparing Canada’s doctors with those in other OECD countries suggests that our doctors are paid relatively well compared to most, but less than those in both the U.S. and the U.K. That said, the U.K. manages to spend much less overall than Canada does and, recently at least, fares better in international wait time comparisons. Simply spending more doesn’t seem to solve the wait time problem, but targeted spending on agreed upon targets that increases productivity appears to deliver better results than across-the-board increases to any part of the health-care system.

Mark Stabile is director of the School of Public Policy and Governance and a professor at the Rotman School of Management, University of Toronto.  He is also an expert advisor with EvidenceNetwork.ca

June 2012

This work is licensed under a Creative Commons Attribution 4.0 International License.