To manage health costs, invest in social well-being

Jim Stanford4 comments

Governments are still reeling from recession-induced deficits, but now their attention is turning to another fiscal elephant marching into the room: the coming renegotiation of federal-provincial transfer payments. The Canada Health Transfer (CHT) expires in 2014, and must be extended soon. Finance Minister Jim Flaherty plans to clamp down on transfers to reduce his own deficit. But that just passes the buck to the provinces, whose fiscal position is even worse.

As this debate heats up, there’s a new piece of knowledge that should be considered carefully as finance ministers arm-wrestle. Since the CHT was implemented in 2004, researchers around the world have established a whole new field of scientific knowledge regarding the social determinants of health.

There is now hard medical evidence that a person’s economic status and social participation directly affects their physical health. And that, in turn, affects the cost of health care. This is not vague, bleeding-heart sentimentalism; it is hard scientific proof.

For concrete physiological reasons, human health suffers when people are subjected to prolonged hardship, stress and disparity. The physiology of this connection involves many body systems, including the impact of stress and unhappiness on metabolism, hormone production, circulatory function and other systems.

This research is well-established in medical journals, was popularized by British epidemiologist Richard Wilkinson in his best-seller The Spirit Level, and was further affirmed by the World Health Organization in a recent expert commission.

What does all this mean for health-care finance? It means that addressing the underlying social problems that scientists now know cause so much ill health, can help to rein in health costs. Governments must therefore be holistic in their programming and budgeting, instead of obsessing on reducing one budget line without regard to how that may affect other expenses.

Diabetes, for example, is an illness with especially strong links to poverty and inequality. Incredibly, poverty is a greater risk factor in diabetes than diet or exercise. Canadians with annual incomes under $30,000 are at least twice as likely to contract diabetes as those with incomes over $80,000. Poverty thus drives up the overall incidence of diabetes – and public-health costs in the process.

Researchers estimate that one in 10 hospital admissions in Canada are due to diabetes and its complications; the Canadian Diabetes Association tallies total direct health costs at over $13-billion per year.

Ironically, however, while medicare shells out billions to treat diabetes, we penny-pinch when it comes to supporting poor people so they don’t get it in the first place. Ottawa denies employment insurance to most of Canada’s unemployed; meanwhile, the provinces underfund social assistance (even programs with direct health impacts, like Ontario’s special diet allowance).

Governments then bicker over who should shoulder the burden of health costs, much of which results from the poverty and ghettoization that their own policies caused. Worse yet, many patients are poor and can’t afford the substantial expenses associated with diabetes (including medication and supplies); this often lands them with expensive complications. Penny-pinching in one fiscal envelope thus contributes directly to ballooning costs in another.

If we reduced the incidence of diabetes among the poorest Canadians to the same average experienced in the population as a whole, we’d cut overall incidence by about 15 per cent. More ambitiously, countries with very low poverty rates (like Sweden and Norway) suffer less than half as much diabetes as Canada.

We could therefore cut diabetes costs in half (saving $7-billion per year in health costs) if we matched their social performance. Exactly the same math applies to many other socially determined diseases, such as hypertension, digestive maladies and mental health.

So a holistic strategy to improve the living conditions of Canadians would not just produce a stronger and more inclusive society. It would pay off in more manageable health-care costs. That would give finance ministers, as well as social planning officials, something to smile about.

Jim Stanford is an economist with the Canadian Auto Workers union.

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