Canada rode recession well but should cut health costs: OECD

MONTREAL: Canada's economic policies and conservative banking culture helped the country weather the global financial crisis, but the government should lower health care spending to stave off debt, a report said on Monday.

"Despite a mostly cyclically driven move into deficit, Canada's overall public finances still compare favorably with those in other OECD countries, but fiscal tightening should nevertheless begin in 2011," the Organization of Economic Cooperation and Development's Economic Survey for Canada said.

The OECD praised Canada for limiting financial and economic damage by maintaining credit flow to households, which increased household debt but kept the economy moving.

The think-tank also pointed to Canada's "conservative risk culture" in the banking sector as a factor that helped it avoid the financial meltdown seen in other industrialized nations.

The OECD projected economic growth in Canada to decline, potentially averaging only 1.6 per cent annually from 2010 to 2017, more than a full percentage point less than over the 1998-2008 decade.

The organization also warned that spending on health care needed to be controlled in order to avoid hiking taxes or slashing other vital social programs.

The OECD said the government ran an overall surplus of 1.6 per cent in 2007 to deficits of 5.1 per cent of GDP in 2009 and a projected 3.4 per cent in 2010, of which half is estimated to be structural.

It noted that Canada's health care system had achieved a good balance between quality, cost and health outcome for Canadians, offering "top-notch care for legislatively-defined essential services, without charge to all residents."

Yet "in the longer run, the soundness of Canada's public finances will likely be largely determined by the decisions taken regarding the health care system," the report said.

Canada's public health and long-term care spending as a share of GDP is set to nearly double by 2050, from 7.3 per cent in 2005 to 13.5 per cent, according to the OECD.

It pointed to several problems plaguing Canada's health care system: longer waiting lists, difficulties in finding physicians, and "expanding gaps" in the coverage of services.

It recommended that doctors' fees should be set by regional and institutional authorities, where there is accountability for performance.

It called for a more competitive delivery of health services, saying regulations that currently prohibit private insurance for core services, and measures that make it difficult for doctors to engage in mixed public-private contracts should be eased.