Mayor's Report - September 2009

Despite the fact that $14.2 billion (35%) of the $40.1 billion in total expenditures for 2009/10 is now directed toward health care funding, the growth in unavoidable health care cost pressures continues to increase at an unsustainable rate. In the next two years health care funding will increase to 38% of the provincial budget, and in 10 years health care funding will be approaching 50% of BC's budget. The conclusion is obvious –– changes to our health care funding model are both inevitable and unavoidable if service levels are to be maintained.

Although total revenues for the Fraser Health Region's 2009/10 budget year is a record $2.4 billion, and provincial funding is $96 million (4.9%) more than the 2008/09 base level, the present economic situation makes it unlikely that there will be a repeat of the additional one-time funding of $45 million provided by the province last year. As a consequence, the actual funding increase for the 2009/10 budget year is 2.6%.

This budget year Fraser Health is faced with more than $102.5 million (4.5%) in rising costs from negotiated agreements and other unavoidable increases, including $53 million (2.3%) in contractually-required wage increases and $43 million (1.9%) in inflationary pressures. Overall, the difference, or budget pressure, between available funding and the anticipated needs of Fraser Health is $130 to $160 million; that is, a difference of 5.4% to 6.7%. A similar funding shortfall can be expected for the next budget year. Not surprisingly, "something has to give!"

The Fraser Health Region serves approximately 1.53 million people in the Lower Mainland, or about one-third of the total provincial population. It is a geographically large area, running west to east from Burnaby to Hope, and south to north from the Canada/US border to Boston Bar. The Fraser Health Region is the fastest growing health authority in British Columbia –– the region's population has almost doubled since 1981, and is expected to grow 27% by 2020. As a consequence, population growth is a significant cost driver for Fraser Heath.

Another significant cost driver is the rising service demand due to the aging population, and we all know that the need for health services increases dramatically with age. In 2006/07 people over 65 made up 14% of the BC population, but used 33% of physician services, 48% of acute care services, 49% of PharmaCare expenditures, 74% of home and community care services, and 93% of residential care services. In 2006/07, roughly 12% of the population in the Fraser Health Region was over 65 years of age. By 2012, the over 65 age group is expected to increase by 20% or 38,200 people, and this demographic shift means a huge increase in demand for health services.

Chronic diseases are prolonged conditions such as diabetes, depression, hypertension, congestive heart failure, chronic obstructive pulmonary disease, arthritis and asthma. People with chronic conditions represent approximately 34% of the BC population and consume approximately 80% of the combined physician payment, PharmaCare and acute (hospital) care budgets. As most chronic diseases are more common in older populations, it is expected their prevalence will continue to increase and the resulting burden of illness will be a significant driver of demand for health services.

The recent announcement that MSP premiums will be increasing 6% annually for three years is just the first of the inevitable changes to our health care funding model, but not nearly enough to maintain current service levels. The question is: where will we obtain the additional funds as cost pressures increase at the current unsustainable rate?

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