The 1995 Fraser Institute Economy in Government Competition:                                                                                         Finalists' Executive Summaries

Fazil Mihlar
The Fraser Institute

Contents

Introduction    by Fazil Mihlar
The Overall Grand Prize Winner and Winning Proposal--The Provincial Government Category
The Local Government Category Winner
The Federal Government Category Winner
Federal Government Programs
Medicare is Killing Us: Re-engineering the Canadian Health Care System
Making Politicians and Civil Servants Cut the Cost of Government or Pay the Price
Provincial Government Programs
Local Government Programs
1993-94 Economy in Government Competition Selected Finalist's Executive Summaries--Health Care

Introduction

Fazil Mihlar, Policy Analyst, The Fraser Institute

IN THIS CRITICAL ISSUES BULLETIN, WE PRESENT summaries of the 17 finalists' papers from the fourth annual Fraser Institute Economy in Government Competition. This year's summaries are arranged in three different categories: local government programs, provincial government programs, and federal government programs. (The proposals that are shown on a shaded background have already been implemented.) Summaries of these proposals are presented first, followed by three proposals on reforming health care from the previous year. The proposed solutions encompass a wide spectrum of topics including health care, social programs, and internal government operations. The finalists have produced proposals that offer substantial cost savings for every level of government.

This competition was created to constructively channel public concern over the massive public debt and the apparent inability of government to change its profligate ways. Two major goals in creating the Competition were to elicit suggestions on how to reduce the unit cost of government services, and to provide a way for ordinary citizens to influence the public policy process in Canada. The competition is well on its way to achieving both objectives.

Now in its fourth year, the Economy in Government Competition has received a total of 2,600 innovative, money-saving ideas from Canadians from every region and occupation. The finalists' proposals have been sent to the relevant officials at the political and bureaucratic levels in the federal, provincial, and local governments. These officials have begun seriously to consider some of the proposals. Indeed, many proposals from the competition have been adopted by different levels of government across the country. They include:

• "Reduce the Cost of Coin Production" by Mr. Bruce Anderson, implemented by the Government of Canada

• "Certified Professional Program" by Mr. Doug Lychak, implemented by the City of Surrey, British Columbia

This year's Overall Grand Prize Winner and Winning Proposal in the Provincial Government Category, "Reducing Waste and Fraud in Income Security Programs in Canada" by C.A. MacDonald & Associates, is currently being considered for implementation.

Canada currently faces an imbalance between what its citizens want from their governments and the resources available to it to meet those needs. This imbalance threatens the nation's fiscal integrity in the near future. The ideas generated through the competition clearly illustrate that more could be done with less if market methods were employed. It is important, however, that governments enact many other proposals from the Competition which will result in literally billions of dollars in savings to Canadian taxpayers.

The Overall Grand Prize Winner and Winning Proposal--The Provincial Government Category

Reducing Waste and Fraud in Income Security Programs in Canada

C.A. MacDonald & Associates

THERE ARE SEVERAL TYPES OF FRAUD IN THE various income support systems which are difficult to identify and prevent because of current federal legislation. The following types of fraud account for the majority of inappropriate expenditures, overpayments, and waste:

• Undeclared Income: Clients in all the income support programs are required to declare their income. Various program regulations define how this income is handled, ranging from income exemptions through benefit reductions or complete disentitlement. Undeclared income results in significant overexpenditures.

• Multiple program claims: Clients are often eligible for more than one income support program. When this is reported by the client, various regulations clarify how the program interaction affects benefit levels and eligibility. However, when this is not reported, overpayments result.

The approach proposed in this paper would allow these types of fraud to be more readily controlled.

In the United States, the federal government has taken a leadership role in the area of fraud control through legislation requiring states delivering the federal programs of Food Stamps, Aid to Families with Dependent Children (AFDC), and Social Security to implement fraud control programs. These fraud control programs are also cost-shared by the federal government. Other federal legislation around security and privacy supports these initiatives.

In Canada, not only is there an absence of leadership in this area, current legislation actively works against detection and prevention of fraud and abuse in the various income support programs. The following main policy thrusts would establish a strong federal leadership role and a climate for appropriate fraud and abuse control in all Canadian income support programs.

1. Establish a priority for fraud prevention and detection. Through the development of new legislation and/or the adaptation of current legislation (eg. Canada Assistance Plan legislation), legislate federal and provincial income support programs in order to actively prevent and detect fraud and abuse. Requirements for reduction of administrative and client error could also be included.
2. Require the use of a common client identifier. The Social Insurance Number (SIN) is the obvious choice for a client identifier. Current legislation on the use of the SIN prevents some programs (most noticeably provincial income support programs) from requiring applicants and spouses to disclose or obtain SIN numbers as a condition of eligibility. Cross-program and jurisdictional comparisons can not be made without a common identifier.
3. Improve access to federal tax information. Routine data matching is required to curb fraud. The current tax system, however, is hampered by confidentiality provisions which prevent income support programs from accessing data in order to identify income sources and amounts, except in individual cases where fraud has already been detected through other methods.
4. Facilitate routine cross-program and cross-jurisdictional data matching. As the federal government embarks on a major program to redesign the Income Security computer systems, a key objective should be to ensure the feasibility of determining which other programs an applicant or current client is receiving assistance from. In effect, this means the creation of a client index for all federal programs (including federally-funded natives receiving assistance on reserves) which could also be accessed by provincial and municipal administrations.
5. Allow administrative disqualification for assistance. In Canada, enforced by CAP legislation, benefits are based on need only, and past or current fraudulent behaviour has no impact on current and future eligibility. In the United States, one identified instance of fraud or program abuse can result in a six-month disqualification, two instances can result in one year of disqualification, and more than two instances of fraud can result in lifetime disqualification. If this type of program were implemented in Canada, information on fraud and abuse disqualification could be shared between programs and jurisdictions.
6. Expand the use of the tax system to recover income support overpayments. Currently, the record on recovering overpayments in provincial income security programs, particularly on closed files, is dismal. Expanding the use of the tax system to include overpayments in other federal, provincial, and municipal income support programs would result in millions of dollars being recouped annually. This is referred to as a "tax intercept program" in the U.S.
7. Encourage the establishment of early fraud detection and prevention systems. Over 30 American states, at the direction of the federal government, have established early detection systems which intercept probable cases of fraud before assistance is granted by integrating fraud prevention and detection into the intake system. Cases are referred for investigation if certain criteria are met (such as lack of or forged identification, needs consistently exceeding income, et cetera). In Florida, California, and Texas, for example, approximately 70 percent of the cases result in assistance being denied or benefits reduced.

The seven areas for improvement identified in this proposal combine to form a unified and comprehensive fraud strategy for income security programs in Canada.

Canadian Income Security programs cost over $85 billion; $39.2 billion of this expenditure supports programs considered to be at high risk of fraud or client error. This is not to say that the other programs are fraud and error free. A conservative estimate of the amount of fraud in these programs is 4 percent, and client error is estimated at 5 percent. Therefore, the fraud and error "problem" in income security programs in Canada costs approximately $3.5 billion. Assuming that these proposals have the potential to reduce the level of fraud and client error by one-quarter to one-third, this would result in a total savings to these Canadian income security programs of something between $875 million to $1.155 billion annually when fully implemented.

This is an ambitious proposal with many facets. However, it offers significant savings at a time when the country needs to reduce its budget deficit. The mood of the electorate also makes this a timely proposal. It is clear that tax payers want to see expenditures reduced rather than taxes raised. Yet, they also do not want to see social programs decimated. This proposal allows managed reductions at all levels of government without affecting the benefits available to those who truly need assistance.

The Local Government Category Winner

Challenge, Change, and the Bottom Line...A Break from Tradition

Jim Godfrey, The Township of Langley

THE PRIVATE SECTOR WENT THROUGH significant restructuring in the 1980s in response to difficult economic times. Private sector firms listened and responded to the needs of their customers. Citizens are expecting nothing less from government. To meet this challenge, the Township of Langley is changing the way it does business, with impressive bottom line results.

A major change involves the restructuring of the budgeting process by implementing a system that:

• provides employees with incentives to save money

• simplifies budget preparation and administration

The new system has been designed to eliminate the systemic barriers contained in traditional budgeting systems, barriers which inhibit improvements in service delivery and efficient use of resources. The key features include:

1. A predictable financial environment through the development of a Three Year Budget horizon. This allows for the planning and delivery of services over a multi-year period rather than the short one year terms associated with a typical government budgeting system.
2. Employees are encouraged to save money by being able to retain 75 percent of the unexpended funds from each budget cycle for use by the department within predefined guidelines.
3. Departments are allowed to retain 100 percent of the net revenues generated through entrepreneurial activity to be used within predefined guidelines.
4. An Annual Adjustment Formula requires an efficiency dividend by virtue of requiring departments to maintain service levels while only providing increases equal to 50 percent of inflation and 50 percent growth. This process encourages increased efficiency.
5. Managers are being empowered by giving them the authority to move funds within departmental allocations and in return are being held accountable for the bottom line. In short, managers will be given the authority to make changes, but will be held responsible for the results through benchmarking, product review, and consumer satisfaction.

These incentives together are projected to provide a dividend ranging from $14.7 million to $19.3 million over the next five year period. This new budgeting process emphasizes a commitment to the customer by providing responsive, efficient, and cost effective services.

The Federal Government Category Winner

Cost Saving through Restructuring of the CBC

Colin Hoskins and Stuart McFadyen

THIS PROPOSAL RECOMMENDS RESTRUCTURING CBC's English Television Network and French Television Network, and examines the resulting cost savings. The CBC receives almost $1.1 billion in parliamentary appropriations. This subsidy supports a mandate, infrastructure, and bureaucracy which is no longer appropriate in a multi-channel environment.

Our belief is that CBC's mandate should be to provide programming that results in external benefits, and that CBC should get out of programming that is plentifully supplied by the private sector, including local/regional programming for a local/regional audience. We propose the following ways of restructuring the English Network and French Network television services.

1. Dispose of the regional production and transmission infrastructure. Local/regional broadcast facilities are not required if the CBC withdraws from local and regional programming for a local/regional audience. The CBC can establish news bureaus to supply local/regional news of national significance to the national networks. Other regional programming, such as dramas and documentaries, should be purchased from independent producers.
2. Increase exchange of programming and co-production between the English and French networks of CBC. This is consistent with the external benefits rationale as it would increase knowledge and understanding of the other official linguistic group in Canada.
3. educe the total hours of broadcasting. In programming, quantity often mitigates quality. It is not necessary for the CBC to continue to broadcast approximately nineteen hours a day. About seven hours broadcasting (from 6.00 p.m. to midnight, with one day-time hour aimed at young children) would be more appropriate for our vision of a scaled-down and distinctive CBC.
4. On service enhancement grounds, we favour eliminating advertising as a source of funding. Reliance on advertising influences programming and scheduling decisions, and is not consistent with a mandate to provide distinctive programming consistent with an external benefits rationale.

The CBC owned and operated stations and transmitters should be sold by auction. Except for national and international news, as well as current affairs, CBC should eliminate all in-house production and buy from independent sources. Advertising as a source of funding should be eliminated. With the savings associated with this proposal, the CBC would be able to operate effectively even with a cut in parliamentary appropriations by $350 million and the loss of revenues associated with no advertising. In addition, there would be the one-time proceeds of some $500 million from the sale of CBC stations and transmitters. A proposed levy on the price of transfers of ownership could bring in $37 million annually. At the same time, the services provided by the CBC would be enhanced. Elimination of advertising and the revenues associated with it means that programming and scheduling decisions would no longer be influenced by commercial considerations. The CBC, therefore, could offer a distinctive service that would complement, not merely duplicate, that of the private sector.

Federal Government Programs

Pension Plums

Joe McLinden

SHORTLY AFTER THE FEDERAL BUDGET WAS tabled, Finance Minister Paul Martin addressed the Canadian Society of New York, where he identified pensions as his next target. In his speech he stated, "The problems exist with the sustainability over the longer term for those people who are middle-aged today. We believe that if we can deal with that now, we can guarantee Canadians who are middle-aged pensions that will really allow them to plan for their old age." The first step for dealing with pension reform should focus on the federal government employer-sponsored pension plan, and in particular, the Superannuation Plan.

Public sector pensions at all levels of government are grossly under-funded, resulting in the creation of liabilities in the tens of billions of dollars. Currently, federal public pensions are $77 billion in the red. This under-funded liability, not included in the frightening debt numbers which are circulated in the media, will be paid out of future tax revenues unless action is taken now to remedy the problem.

This proposal focuses on public sector pensions which fall under the jurisdiction of the federal government. These consist of pension plans covering Members of Parliament (MPs) and public sector workers, including both civil servants and individuals working in Government Business Enterprises. A similar problem also exists at the provincial and municipal government levels but the pension plans and funding structure are different and would require individual proposals in more detail to address the issues properly.

Presently, a group of workers, notably those concentrated in the public service, have relatively better pensions than those in the private sector. Public sector employees are a select group who enjoy the security of fully-indexed pensions. Pension arrangements for public sector employees must be subject to the same regulations that apply to private sector employees. The governing factors that should be in place to ensure equity in both sectors include the tax considerations outlined in Revenue Canada's taxation laws and the ethical and legal criteria included in the Charter of Rights and Freedoms.

Legislation required to address the public sector pension issue has to be initiated and passed by a majority of the MPs. It is these same individuals who have promised pension reform for MPs and who finally made a feeble attempt to reform their own pension plan. After this most recent reform, MPs still earn pension credits twice as fast as income tax laws allow--a slight reduction from the previous level of two-and-a-half times. This recent reform is not retroactive for those who have sat in the House for at least six years, or who are now drawing pensions. The MPs lack credibility to initiate change. If they can enact legislation that breaks the law for their own benefits, then the precedent is set for the public sector pension plan to continue to do likewise.

One option is to change all current pension plans to contributed benefit plans. Further, these contributed benefit plans should only pay annuities based on the value accumulated through contributions to the plan. All past plans that are deemed inequitable should be taxed at a greater rate to generate revenue. This revenue would then be funnelled toward private sector pensioners in the form of tax deductions. When the Canada Pension Plan (CPP) was introduced, the federal government reduced payments into the Superannuation Fund. Eligibility for CPP and Old Age Security should be eliminated for those who have not contributed enough to the pension fund to maintain a fully-indexed pension.

One expedient way to carry out the change is to challenge the government's use of the taxpayer's money in the courts, charging it with violation of the tax laws and discrimination under the Charter of Rights and Freedoms. This action could be initiated by an individual in the private sector contributing an amount that exceeds the maximum allowable RRSP contribution and deducting that amount from taxable income. Revenue Canada would disallow the claim and set the stage for a challenge in the courts. The courts could review the claim under clause 15 of the Charter of Rights and Freedoms and could be expected to hand down a decision that would require the government to take action to correct past and present inequities.

Baby Bonus Canada Savings Bonds

Bruce Anderson

REVENUE CANADA AND THE BANK OF Canada should cooperate to make possible the automatic monthly purchase of Canada Savings Bonds (CSBs) by recipients of Child Tax Benefits (CTB). Whenever the CTB receipt is so directed, the CTBs would be sent by direct deposit to a new set of Canada Savings Accounts established for the purpose. Implementing this proposal will increase the use of direct deposit service (DDS) by CTB recipients, thus creating cost savings. More importantly, offering automatic CSB purchases with CTB funds will increase CSB sales, and add both to the savings made for our children and to the interest earned on those savings.

CSBs are a less costly way to finance Canada's national debt than are regular bonds. Therefore, if this proposal is implemented, the interest cost of our national debt will fall. Adoption of this proposal could provide total benefits of $250 million or more in the first five years, and should by then be growing at something approaching $100 million per year. In little more than a decade, $1.5 billion could be brought into CSBs from domestic sources, displacing an equal amount of foreign borrowing.

CSBs may be purchased only in the fall of each year, so monthly CTB funds will need to be deposited to in a new set of accounts maintained by the Bank of Canada or Revenue Canada where they will accumulate during the year. These should bear interest at the then-current CSB rate, or some other attractive level.

Already, CTB recipients can choose to receive CTBs through Direct Deposit Service. This method of payment is periodically promoted by Revenue Canada mailings. Piggybacking on these mail campaigns will allow an inexpensive way of offering and enroling CTB recipients in this new CSB savings and purchase option. Visionaries may see that this proposal offers a practical path towards achieving a viable Victory Bond campaign analogue.

Medicare is Killing Us: Re-engineering the Canadian Health Care System

Dennis L. Modry, M.D.

ARGUABLY, 70 PERCENT OF ALL HEALTH problems paid for by Medicare are self-induced, and 50 percent of expenditures in Medicare are unassociated with any improvement in health outcome. Medicare, therefore, may have unnecessarily contributed $340 billion to our total Canadian debt. The health and debt crises are driving the discussion for health care reform, but how should health care be re-engineered?

Presently, the health reform battle is raging in the national media and on national and provincial political fronts. The ideological battle defines the essence of the Canadian debate on health care and the combatants include those who believe that health care is the sole domain of the state, some who believe that the state should have no stake in health care at all, and a majority who believe that health care should be shared between the private and public sectors. It is easy to understand how these battle lines are drawn in a democratic society. On the one hand, more control, lower cost, greater choice of payment, accessibility, and quality are being demanded by the majority of the population. On the other hand, those who favour big government and those who are benefitting from an inefficient state-run medical system oppose any change.

The greatest opportunity that we have in re-engineering the health care system is to provide Medicare (catastrophic and proven services such as medical diagnostic and therapeutic interventions) for the disadvantaged, with third party insurance coverage for the remaining 80 percent of the population. The disadvantaged would include those individuals who, by virtue of physical and mental incapacity, are unable to care for themselves in a similar situation. By providing Medicare coverage to only the 20 percent of the Canadian population deemed disadvantaged, the potential savings would be substantial.

By eliminating the 50 percent of all Medicare expenditures which do not improve health outcomes, it is possible to reduce the Medicare budget from $70 billion to $35 billion. By further restricting Medicare to the 20 percent of society who are disadvantaged, expenditures can be further reduced to $7 billion. Moreover, reduced taxation would save a further $63 billion. Further, reduced taxation would give greater disposable income for the 80 percent of the population needing to purchase third party insurance.

What is frightening to most individuals concerned about health care reform is that a move away from the current Medicare system will cost them more if they become ill. This essay will demonstrate that that cost will be dramatically reduced, and that individuals will have more purchasing power for the goods and services they want, including health care, in a more responsible entrepreneurial and economically viable health care system.

Medicare has dismally failed to prevent lifestyle-generated problems, which use 70 percent of all public health expenditures. Medicare has allowed patients to completely devolve responsibility for their health to others. When people become ill they demand that someone else make them better, and someone else, yet again, pay for it. What are the forces that are lacking to encourage individuals to take responsibility for their health? Primarily, the most relevant force is individual economic responsibility.

The Canadian health care system is a single-payer funded tax-based monopoly based on the incomplete principles of the 1984 Canada Health Act, which include universality, portability, comprehensiveness, and public funding, and administration. What is missing in the Canada Health Act is choice; choice to determine how one pays for health care, access it, and the quality of care that one receives. Canada is now one of the few countries among the OECD nations to restrict consumers and providers from coming together outside Medicare, and to restrict competition in basic services. For the lack of choice and for the mediocre quality, Medicare is too expensive, too uncontrollable, too slow to adapt, and too stifling, not withstanding its inability to stimulate optimal health care decision making or to control costs. The Canadian health care system must change in order to:

• provide an incentive to maintain a healthy lifestyle and be responsible and accountable for achieving those ends

• Be responsible to the overwhelming public complaint that we are over governed, over regulated, and over taxed

We must start by understanding the components and problems of our health care system which include: the Canada Health Act, hospital administration and boards, physicians and surgeons, the nursing profession, paramedical personnel, patients, the legal profession, poverty, fraud, and wellness promotion.

Identification and correction of the problems identified in each of these areas must be left to each province to decide. Human creativity and competitiveness will provide an ongoing incentive towards continued quality improvement and will lead to the most cost effective health care model for the future in Canada.

This model puts the disadvantaged first and foremost with proven basic health care coverage which allows them access to the same hospitals and physicians that those covered by third party insurance would receive. This model, most importantly, reestablishes individual responsibility for health care decision making, and allows the public sector to eliminate a large portion of its current Medicare expenditures. Savings in health care could help eliminate the deficit, leading to lower levels of taxation and greater individual freedom to purchase the goods and services of our choice.

Making Politicians and Civil Servants Cut the Cost of Government or Pay the Price

John Robson, Ph.D.

EVERYONE WANTS GOVERNMENT TO BE CHEAPER. Every campaign features promises of leaner and meaner administration. The reason every campaign features these promises is that almost no politician ever succeeds in delivering, so they retain their appeal election after election. There are two main reasons for this. One is a failure to appreciate that program spending is the source of our problems. It is not the bureaucracy; as Sir Humphrey Appleby maintains in the British comedy Yes Minister, the reason for all that bureaucracy is that Parliament keeps creating programs and they all have to be administered. The other is the failure to appreciate what government is and how it works. Combined, these reasons lead to chronic program overspending, and chronic waste; and both these problems need to be tackled with an appreciation of where they came from. That is where "public choice theory" comes into the picture.

Among the insights of public choice theory, some awareness is growing of the fact that government is not a benign entity but rather an eclectic and often poorly organized collection of individuals--politicians and civil servants--all of whom are responding to day-to-day pressures that often distort their behaviour away from a pure dedication to the "public interest."

To help overcome both the perverse incentives and lack of knowledge that bedevil government, I propose relating salaries within government directly to the budget balance. If every politician on the government side of the aisle, and every civil servant period, saw a 25 percent pay cut if there were a 25 percent budget deficit, we would suddenly discover that all the insurmountable obstacles to sound national finances were less insurmountable than they had appeared. Suddenly, impossible spending reductions would become unavoidable. Suddenly, waste that before could not be prevented now would not be tolerated.

The proposal would directly cause more honest spending estimates and more frugality in the portion of spending accounted for by government operations. But by forcing politicians and bureaucrats to reveal, and the public to face, the real cost of programs, this effect would lead to a substantial reduction in overall government spending.

The salary and bonuses of all government politicians and all civil servants should be based upon the current scale, but multiplied by (government revenues/government expenditures), both as broadly defined as possible. However, under no circumstances should the actual salary exceed the base figure by more than 10 percent. Budget surpluses of over 10 percent may seem improbable, but for reasons outlined below the major danger in this proposal is dishonest bookkeeping, and we do not want to encourage that. By the way, a slightly less drastic version would exempt civil servants from this mechanism. But this way is preferable.Note

There is, in principle, nothing wrong or even controversial about performance-based pay. Likewise, there is, in principle, nothing wrong or even controversial about making governments accountable. This proposal would help educate the public, by forcing politicians and civil servants to put a price tag on all the wonderful things they offer, and by forcing them to put their own money, not just the tax payers', where their mouths are.

Provincial Government Programs

Fee for Service Judicial Functions

Thomas W. Hadaller

THE RAPID CHANGES AND EVER-INCREASING complexities in our society are often reflected in the issues that come before our courts and administrative tribunals. These bodies must cope with constant increases in both case volumes and complexities. This problem is most often addressed by either increasing workloads on existing judges, quasi-judicial court officials, and crown attorneys, or by increasing the number of these staff involved in the particular function.

It is my position that we can not continue to address this problem in these ways. A more cost-effective method would be to contract out some of these functions to private lawyers on a fee-for-service basis. In many other professions, notably the medical profession, fee-for-service structures are the rule, not the exception. In my view, such structures serve well to promote productivity and efficiency. Indeed, most of the legal profession operates on a fee-for-service basis.

There are two areas in particular upon which attention should be focused. The first is that of the so-called quasi-judicial functions. These are usually more routine judicial functions which are performed by court staff other than judges, such as bail hearings, traffic matters, small claims, etc. These functions should be provided on a fee-for-service basis following the methodology I have outlined in my proposal. The second area is that of crown attorney services, particularly in the area of criminal prosecution. In both cases, the process involves recruiting a panel of lawyers to act on a rotating basis in the place of the current staff and being paid according to pre-determined fee schedule. I propose that fee structure guidance could be obtained from the local legal aid tariff and that the hourly rates should be roughly equal to the legal aid rates.

In addition, the other financial savings generated by this proposal would come from a number of service delivery improvements that would accrue from the changes suggested above. These include more flexible hours of hearings, more efficient use of court facilities, and more flexibility in meeting varying caseload volumes.

Much assistance in the design and operation of this proposal can be obtained by reference to the existing legal aid program. Like my proposed system, legal aid involves private lawyers performing legal services with their compensation being given according to a prescribed fee schedule. Particularly, some of the administrative functions in the legal aid system, such as accounts payable, are very close to those suggested, and indeed could perhaps be combined to save administrative costs.

Overall, this proposal suggests an alternative method for the delivery of certain justice-related services which, if implemented properly, has the potential for enormous financial benefit to the government and ultimately the taxpayer, while at the same time improving service to the public.

Automation of Student Loan Applications

Terrence Hibbert

EACH OF CANADA'S PROVINCES RUNS A STUDENT loan program. Every year, thousands of prospective students fill out the necessary applications in the hopes of receiving their allotted funding. It is at this stage that this proposal takes effect. When these students apply for various summer or permanent employment opportunities, many firms request an application by way of ACCIS forms. These ACCIS forms have been computerized in recent years and have been made available on disk for all applicants. This same process could and should be duplicated for the student loan and bursary programs.

Instead of annual application packages, students would receive a diskette with all the necessary information and forms that would be required to process the information. This diskette would then be sent back to the program office where the applicant's file would be fed into a central computer and down-loaded into a data bank. The diskette would then be cleared of its information and be made available for redistribution.

Students would pay an application fee upon receipt of the diskette in order to ensure its return, and pay for any replacement diskettes. Thus, once the initial number of diskettes had been purchased, the cost to the Ministry for replacement of lost or damaged diskettes would be minimal.

The cost savings to the Ministry would be twofold. First, the annual cost of printing paper materials would be saved in favour of a one-time investment in diskettes. Second, staff could be reduced at the provincial ministry offices as well as at all financial aid offices at universities and colleges. An environmental savings from reduced use of paper is also to be realized with this plan. Given the cost of creating and implementing this program, the overall savings after five years would be almost $20 million.

This plan is a relatively simple way to achieve a great cost saving in each of the provincial governments as well as the country's universities and colleges. In these days of cuts in transfer payments and tuition increases, the cost savings projected here are likely to be an underestimate. The demand for this program will increase as many more students will be seeking financial aid in the future.

L'organisation -- Réseau au en santé et education

Noel Pellerin

LA GRAVITÉ DU DÉSÉQUILIBRE STRUCTUREL DES finances publiques couplée à l'objectif du Concours de maintenir les services à la population expliquent que deux vastes secteurs de l'activité gouvernementale au Québec, accaparant plus de 50 % de l'ensemble des crédits, aient été ciblés dans le cadre de la proposition "L'organisation-réseau en santé et éducation". Ce choix apparaît d'autant plus pertinent que le gouvernement fédéral, dans son budget du 27 février dernier, a décidé de réduire de 800 millions de dollars en 1996-1997 ses transferts financiers au Québec au titre de la santé, de l'éducation post-secondaire et de l'aide sociale.

Cette proposition qui vise à améliorer l'efficience des systèmes de santé et d'éducation et à en réduire le coût collectif s'énonce ainsi :

«Implanter le concept d'établissement-réseau dans les systèmes de santé et d'éducation au Québec en s'appuyant sur la démarche et les outils de diagnostic et d'intervention développés dans le cadre du volet Mise en réseau d'entreprises de la Stratégie de développement industriel du Québec (grappes industrielles) et ce, en assurant aux centres d'activités-clés des établissements ainsi mis en réseau l'accès aux technologies d'information et de communication appropriées».

Cette proposition prévoit, sur la base des résultats de diagnostics préalables rigoureux, le démantèlement, au bénéfice du secteur privé, des centres d'activités (noeuds dans le jargon des réseaux) de moindre importance par rapport à la mission publique des établissements, l'actualisation, par le biais d'une spécialisation accrue, du potentiel d'amélioration des noeuds déjà jugés performants et, enfin, l'instauration ou la consolidation de multiples liens de coopération.

Sous la supervision étroite des autorités des ministères de l'Éducation et Santé et Services sociaux, quelques 500 consultants privés bien préparés à la tâche et appuyés de professionnels des secteurs concernés, procéderont aux analyses diagnostiques, légitimant ainsi cette vaste réforme, et accompagneront les têtes de réseaux dans la concrétisation de leurs projets porteurs d'efficience et de réduction de coûts.

Sans présumer des résultats diagnostics constituant l'assise même de la proposition, le document fournit plusieurs illustrations du type de projets pouvant découler de l'application de la démarche.

C'est toutefois l'exploitation systématique de toutes les occasions de coopération et de réduction de coûts que recèlent les systèmes de santé et d'éducation qui confère à la proposition son véritable intérêt.

Deux projets, coordonnés centralement, viend-ront enfin compléter la réforme, soit l'établissement de Centres de monitoring des réseaux, visant à assurer la souplesse de ceux-ci, et la mise en place de mécanismes légers de Veilles concurrentielles internationales afin de tirer pleinement parti de ce qui se fait de mieux en Santé et Éducation à l'échelle internationale.

La proposition présente une dizaine d'avantages spécifiques. Outre la réduction des coûts et une amélioration des services dans la plupart des cas, elle reconnaît objectivement les compétences humaines, elle pose des diagnostics rigoureux légitimant ainsi les processus décisionnels, elle évite, en mettant l'accent sur les centres d'activités (noeuds), le piège de la fermeture d'établisse-ments, elle offre un potentiel supérieur à celui du réingineering du fait qu'elle vise des systèmes productifs complets plutôt que des établissements et, enfin, elle pourrait s'appliquer partout au Canada, ouvrant ainsi la voie à la coopération inter-réseaux entre les provinces.

Un plan d'action sur deux ans précise les étapes de la démarche d'implantation de la proposition qui s'inspire, là encore, de l'expérience acquise dans le cadre du volet Mise en réseau d'entreprises de la Stratégie de développement industriel du Québec.

Nous estimons à 310 millions de dollars le coût de la première des deux phases d'implantation de la réforme, visant les hôpitaux et les écoles primaires et secondaires, montant qui serait engagé pour l'essentiel en 1996-1997.

La seconde phase de la réforme vise les autres établissements des deux systèmes. Son financement proviendrait des bénéfices engendrés par la mise en oeuvre de la première phase.

Globalement, la réduction des dépenses annuelles récurrentes du Gouvernement du Québec, attribuables à la réforme proposée, est évaluée à plus de 6 milliards de dollars, soit un montant légèrement supérieur au déficit courant.

Ces économies proviennent à raison de 2,2 milliards de dollars du passage au secteur privé d'activités non directement reliées à la mission publique des réseaux et, à concurrence de 4 milliards de dollars, des gains de productivité sur les activités publiques maintenues.

De façon inévitable dans le contexte du secteur public, la proposition engendre des coûts sociaux que pourraient toutefois gérer les autorités gouverne- mentales concernées (mesures de redéploiement de la main-d'oeuvre, semaine de 4 jours, etc.).

Le défi est donc de taille mais il vaut d'être relevé puisqu'il pourrait en résulter une élimination rapide du déficit du Gouvernement du Québec dans le respect de l'objectif du Concours d'économies dans l'appareil de l'État de maintenir les services à la population.

D'une liste electorale

Michel Rochette

UN DES PROCESSUS FONDAMENTAUX QUI permettent aux citoyens d'exercer leur droit de vote est la préparation des listes électorales sur lesquelles apparaissent le nom et l'adresse de chaque personne remplissant les conditions nécessaires pour voter.

La proposition résume la situation actuelle du processus électoral : législation le régissant, définitions de la qualité d'électeur aux niveaux fédéral, provincial, municipal et scolaire, limites fluctuantes des diverses circonscriptions électorales selon la nature de l'élection, préparation de la liste électorale, déroulement de l'élection et aspects financiers de la préparation des listes électorales (coût de cette préparation pour l'ensemble du Canada, tous paliers de gouvernement confondus, et excluant les référendums et les élections partielles éventuelles : 110 millions de dollars tous les quatre ans). En bref, quiconque a déjà fait l'objet d'un recensement en vue de l'établissement des listes électorales a pu constater le côté archaïque du procédé.

Au vu des développements spectaculaires de l'informatique et des méthodes de transmission des données, l'auteur propose une approche concrète permettant d'utiliser les ressources matérielles et humaines actuelles des gouvernements en place afin d'établir les listes électorales et de les maintenir à jour.

Les données essentielles de chaque individu repris dans un fichier informatique utilisé pour l'établissement des listes électorales devraient être : nom et prénoms, date de naissance, adresse (avec insistance sur le code postal) et citoyenneté.

Plusieurs fichiers informatiques reprenant divers renseignements personnels d'électeurs potentiels existent déjà : banques de données des bénéficiaires des programmes sociaux, fichiers des permis de conduire, fichiers du Régime des rentes du Québec, fichiers des contribuables, fichiers des cotisants à l'assurance-maladie, etc. L'auteur est d'avis que la base de données répondant le mieux aux critères proposés est celle des régimes d'assurance-maladie de chaque province et territoire.

Les coûts de la mise en oeuvre initiale d'une liste électorale informatisée (publicité, manipulations informatiques et frais d'administration) sont estimés à un dollar par habitant, soit 26 millions de dollars pour l'ensemble du pays. Les avantages sur quatre ans seraient de l'ordre de 100 millions de dollars, ce qui se traduirait, à long terme, par une économie de 380 millions de dollars.

La mise en oeuvre d'une liste électorale informatisée pourrait se faire très rapidement, deux ans environ après les études, les consultations, les négociation touchant aux transferts de données, l'informatisation des circonscriptions électorales et le vote des amendements nécessaires à la législation existante.

La population a tout a gagner de l'adoption de cette proposition puisque les gouvernements pourront réaliser des économies tout en permettant à la démocratie de s'exercer de la manière la plus fiable possible.

The Electronic Procurement and Settlement System: Cutting Government Overhead Costs Through Electronic Commerce

Jean Sevigny

THE VAST MAJORITY OF SAVINGS EFFORTS focus on program change. These changes seem more significant than the mundane details of administration. However, economy in government is not just about what governments do, it is about how they do it. Ignoring the "how" is ignoring the opportunity to save billions of dollars across Canada's public sector.

The best government program is still a waste of money if it is run inefficiently. Ask Canadians about their experiences with government inefficiency. They ask why it seems to take five supervisors to watch one worker fix a pothole. They ask why they need to fill out so many forms, or wait so long, for a government office to act on a simple request. And yet, discussions of economy in government ignore this aspect of the day-to-day experience of Canadians.

Inefficiency is rampant in the area of government purchasing and bill-paying. The federal government alone spends approximately $1 billion a year on overhead costs associated with its purchasing and payment for goods and services, and the federal level accounts for just 8 percent of the 2.3 million Canadians employed in the public sector.

When you consider the amount of purchasing done by all governments and all public sector organizations such as school boards, hospitals, colleges, and universities, the overhead costs are staggering. Why so much? One reason is the sheer volume of transactions. There is virtually nothing that governments do not buy. In 1995/96, the federal government expects to spend $8 billion on off-the-shelf goods and services from more than 25,000 firms across Canada.

Modern electronic technology offers immense opportunities for government to break out of the thinking behind old and costly purchasing processes. It offers the chance to sweep away layers of overhead activities and realize massive savings.

This submission consists of a proposal for the rapid implementation of electronic commerce in government. The proposal harnesses a combination of purchasing tools including industry standard point-of sale systems and PC-based purchasing software. The heart of the proposal involves connecting the available purchasing tools with existing commercial transaction processing services.

Simply put, the Electronic Procurement and Settlement System (EPS) provides the means for public sector organizations to shift a large part of their transaction processing chores onto the commercial transaction services currently used by the banking and retail sectors. The heart of the EPS is a system of registration that is much like the relationship between the bank account and the debit card that consumers in most parts of Canada now use. For example, if a consumer wants to buy a pen, she goes to a store, picks one out, and takes it to a cash register. At the register a store clerk "swipes" her debit card through a machine. The machine reads the information and makes contact with a transaction processing centre.

Once contact has been made, the consumer uses a Personal Identification Number (PIN pad) to approve the charge. This confirms that she is the authorized owner of the card with the authority to order that funds be withdrawn from a specific account. EPS would work the same way for a government department, such as the RCMP, that may have to buy 10,000 pens. It uses the same commercial services, but offers more stringent control features.

The savings potential for government is significant. The current processing costs of $120 per transaction can be cut considerably by a shift to electronic commerce. The EPS settlement module alone could reduce these costs by $29 per transaction. In addition, when the purchasing tools are also used, an additional $43 could be saved through the elimination of purchase order preparation and order tracking. This is a total cost avoidance of $72 on each of the 10 million federal government transactions, or $720 million in the federal government alone. The savings potential of implementing EPS across the whole public sector tops $6.4 billion.

An EPS-type system can privatize a good part of public sector transaction processing. It could eliminate many functions in public sector agencies. The proposal defies the usual incremental approaches. It does not require anyone to commission studies or build sexy new systems. It simply requires that public sector agencies stop performing grossly inefficient tasks, and switch to the existing commercial services that the private sector has developed in response to market incentives.

Local Government Programs

The Strategic Cost Management Process

Town of Ajax

THIS SUBMISSION DESCRIBES THE STAR$ COST management activity which is being implemented with great success by the Town of Ajax. STAR$ is a novel approach to cost reduction which can be applied throughout the public sector in Canada--by all levels of government, hospitals, and school boards--as an on-going approach to cost reduction.

Canada's public sector is faced with a massive deficit reduction challenge. Recent approaches have been typical of organizations in crisis--downsizing, restructuring, cuts in service, and expenditure reduction. While these actions may be necessary for short-term survival, they are eroding the base for a healthy, viable public service in the future. Programs are being decimated, infrastructure investment is being slashed, and public service morale is at an all-time low.

We need to re-invent government in Canada, not destroy it. One of the cornerstones of this process will be to develop a way to continue to bring down the costs of the public service. But this has to be done in a way that improves service quality and builds a strong morale among public servants.

Our submission describes a revolutionary approach to cost management--one that we call "lean, keen, and creative"--and that has the proven capability to achieve these positive outcomes. This approach can be used in a proactive way and can reduce costs without the need to resort to the "lean and mean" approaches cited above.

Strategic cost management is built around four basic concepts: innovation, involvement, investment, and incentives. There are a number of factors which are critical in the short-term for establishing a successful cost management activity. Briefly, these are to create awareness of the need for the activity, develop an understanding of its nature, and gain a level of initial involvement from all employees in order to demonstrate success.

In most organizations, a full-time cost management champion is required. Reporting to the senior executive (usually the sponsor of the activity), this person's role is to build support for the activity throughout the organization. This full-time champion is supported by a network of part-time champions. The activities of these champions must be supported by all members of senior management. The acronym PRIDE was adopted by the Town of Ajax to guide management behaviour in providing this support:

• Promote the activity

• Expedite implementation of cost reduction ideas

The final critical success factor is the framework itself, which must be developed and implemented in its entirety. The generic framework of objectives, communications, education, structure, activities, and rewards/recognition is an integral, mutually-supportive implementation package.

In the public sector, the results to date are encouraging. In the Township of Pittsburg, operating costs have been reduced by 15 percent in two years. In Ajax, Ontario, an eight week blitz has already resulted in $500,000 of implemented savings, and $2 million in savings (8 percent of the operating budget) is targeted for 1995. In addition, a variety of other indicators usually show considerable improvement. In all the municipalities adopting this approach, the quality of services to residents, such as garbage collection and community services, has improved, while waste has been sharply reduced.

In our submission, we describe the true nature of cost management from a strategic perspective. We then discuss the framework that provides its structure, how to implement it, and describe the roles and structures involved. The submission concludes with a summary of the benefits that the approach has brought to Ajax and what other organizations can expect to gain from following the same route to fiscal viability.

Municipal Government Benchmarking Survey Pilot Project

Performance Insights

PERFORMANCE INSIGHTS, WITH THE CO-sponsorship of Michael Boggs, Chief Administrative Officer of the Regional Municipality of Niagara, is currently conducting a benchmark analysis of three municipal activities in 34 municipalities across Canada. The survey publishes, on an anonymous basis, previously unavailable information, and creates a new benchmarking tool, the Performance Map-. Information in the Performance Map- will result in better decision making and enhanced efficiency in municipal government spending. Benchmarking offers a window of insight into Canada's $55 billion annual municipal expenditure.

Benchmarking is the process of measuring a city's current status with respect to specific services and comparing it to past performance and the status of other cities. This pilot project collected and analyzed resources used, and output of, three different municipal services: water supply, waste water management, and fire/emergency services. Our service is suited to, and will include, all entities of local government. We serve Upper and Lower Tier Municipalities, Cities, Towns, Boroughs, Townships, Districts, Counties, and Regions. In this submission, we use the term "local government," "municipality," and "city" interchangeably for the above entities.

The Performance Map- provides professional municipal managers with a powerful new management tool: comparative analysis. This pilot project has demonstrated to participating municipalities the value of benchmarking, as well as its strategic advantages in budgeting and re-engineering efforts. Upon completion of the pilot project, we plan to extend survey-based benchmarking to a full range of municipal services in over 5,000 municipalities across Canada and the United States.

Like all levels of government, municipalities are being forced to do more with less. This project provides municipalities with clear, quantitative performance measures in a form that drives action. Benchmarking will allow municipal officials to manage their resources based on the best information available, benchmarked against the experience of the best practitioners.

Conventional wisdom holds that comparison of municipalities' financial and operating performance is not valid because each municipality is unique. We maintain that the cost and output of specific municipal services can be compared and understood. The Municipal Benchmarking Pilot Project is beyond the scope and capabilities of any individual municipality. Delivered by a single outside provider, it is objective, cost effective, and can benefit all participants.

Benchmarking has contributed to significant gains in quality and cost reduction in the private sector. The opportunities to exploit "best practices" and realize efficiencies in local government management may be much greater. In the fall of 1995, Performance Insights will offer survey-based benchmarking for as many as 15 activities to municipalities across Canada and the U.S.

Professional Firefighter Hiring Practices: Re-engineering the Process

Wayne Bernard

THE FIRE SERVICE IN BRITISH COLUMBIA follows a long-standing practice of recruiting firefighters based on a process that is not cost effective and lacks productivity and efficiency. The Surrey Fire Department's revolutionary new program will effectively re-engineer this process, which will result in vastly improved productivity, cost savings, and improved efficiency. This program will not only show these immediate benefits, it will also identify broader, long term advantages. One example is reduced concerns regarding risk management resulting from the implementation of this concept.

Firefighter hiring practices today have several problems: inconsistency of training, lack of standards, duplication of services, and high and escalating costs. The average training cost under the current system is $11,600 per candidate. The larger fire departments around the Greater Vancouver area expect to hire 125 firefighters for 1995. Based on a projected cost of $11,600 per recruit, this would result in a cost of $1,450,000 for firefighter recruitment and wages during training.

The old firefighter hiring model consisted of selection, hiring, and training. The new process is based on selection, training, and hiring. This new process simply means that all selection and training requirements are facilitated by the Fire Academy and costs are the responsibility of the candidate. This will result in a saving of $11,600 per candidate. Cost savings to Fire Departments in British Columbia generated by the introduction of this program would be approximately $1,392,000 in 1995. A conservative estimate of savings over the next five years would be about six million dollars for Fire Departments throughout the province.

With the Fire Academy being responsible for pre-employment selection and training, Human Resources Departments and Fire Department support staff can channel their efforts into other areas. Fire Department training branches can now become more productive with respect to maintenance training for existing personnel. Finally, and most significantly, employers are not paying wages and providing training for nine weeks while the recruitment process is proceeding. Firefighters are productive immediately upon hiring, and are placed into service in fire stations, fully trained and qualified.

A major element of this program is based on accreditation. We will show that the newly-developed Fire Department recruiting process-- accreditation by an International Congress--will be the model for efficiency and professionalism in firefighter training.

As in any major change introduced in society from time to time, there are obstacles to overcome. These obstacles usually stem from fear of the unknown and simply from fear of change itself. To understand the fear of this change in the Fire Service one needs to understand the culture of this organization. The Fire Service is a paramilitary organization heavily entrenched in heritage and tradition.

Implementation of this program is simple. Every fire department in British Columbia can access it in conjunction with the British Columbia Fire Academy. The Fire Academy was developed to provide this type of service to the province and can effectively manage the needs of the fire service. We will be able to provide an improved, more productive, and less costly fire service to our communities.

Certified Professional Program

Doug Lychak, City of Surrey

AS GOVERNMENT BUDGETS TIGHTEN AND taxpayers demand improved service levels, local governments are faced with continuing pressure to offer more with less. Governments of the 1990s have been challenged to look for innovative ways to become more efficient with fewer resources.

The Certified Professional (CP) program for the City of Surrey represents a successful example of government streamlining to achieve improved client service levels. The program offers training to private sector professional engineers and architects on the British Columbia Building Code and the municipal permit and inspection process. The program supports training of CPs in order to reduce municipal staff time in processing development applications. Although the activity of Surrey's Building Division has increased substantially since the program was initiated, no new staff have been hired. It is estimated that 1-2 additional Plan Checkers would have been required had the CP program not been implemented in Surrey. It is estimated that development application and approval times have been reduced by 16 weeks, representing a substantial improvement in service delivery.

The CP program significantly improves development processing times, thus enabling Planning and Development Department staff to issue permits within two weeks of receipt of an application, provided all other application criteria have been met (often the building permit is issued prior to a complete application being received). This translates to a 16 week increase in productivity of application processing times between 1991 and the end of 1993.

When the program was first implemented, a total of 87 of Surrey's more complex projects were approved through the CP program. On an average CP project (ranging in value from $750,000 for a low rise to $26 million for a high-rise development) the savings in financing costs to the developer are estimated to reach as high as $34,100 on typical large-scale development projects. The overall potential municipal staff cost savings is estimated to be $3,785 per $1,000,000 of construction value.

The most effective means of implementing such a program is from the bottom up. Each province's provincial municipal association could be the catalyst for change. The topic could be introduced during an association meeting and a workshop organized to address planning and implementation issues and strategies. The results of pilot initiatives could subsequently be communicated through the municipal association and/or through inter-municipal networking.

Restructuring the Federal, Provincial, and Municipal Levels of Government

Amery Boyer

FOR YEARS, EXPENDITURES AT ALL LEVELS OF government have been out of control and there have been various government initiatives to address this problem. These initiatives have included reductions in departmental budgets, wage rollbacks, the selling of Crown Corporations, such as Air Canada nationally, and Nova Scotia Power Corporation in Nova Scotia, and some military base closures. The recent federal budget was developed in much the same vein with cuts to the Department of Defense budget, reduction of civil service jobs, the privatization of CN and Petro-Canada, the elimination of some subsidies, and a projected reduction in transfer payments to the provinces.

Many members of the business community believe that the budget did not go far enough in reducing government deficit/debt. The cry from the less advantaged members of society is that the budget does nothing to alleviate chronic unemployment, underemployment, and the plight of the working poor. The question is "how do you reduce the debt and improve the lot of economically disadvantaged members of Canadian society at the same time?"

The answer to this is business process re-engineering. Existing federal, provincial, and municipal government structures have evolved over time largely independently of one another. As new demands were made of governments, new departments, agencies, boards, and commissions were added, making government an increasingly complex maze of bureaucracies. Further, the fundamental structure of government has not changed much since its inception. Most government departments are the product of long-standing legislation which has become cumbersome and in certain cases outmoded or redundant. The sheer weight of these various pieces of legislation now defeats efforts to improve government processes.

This paper proposes the adoption of Total Quality Management principles. These include:

1. Employee Empowerment: One of the principles of quality management is the principle of delegation, or to use the latest buzzword, "empowerment," to the lowest possible level. In terms of government, the level closest to the customer is municipal government.
2. Integration of Systems: When systems and services are integrated, it is less likely that bureaucrats will unintentionally develop systems that are at cross purposes with each other. In an integrated environment, it is more likely that problems can be analyzed by cause and effect since both the causes and related effects can be readily seen.
3. Continuous Improvement: The principle suggests that improvement, no matter how small, is important, provided it is a continuous process.
4. Management by Fact: An organization that encourages the use of facts to support decision-making is more likely to make good decisions than an organization that uses supposition and assumption.

This proposal outlines a completely new way of looking at government. Instead of the top down federal model that currently exists, a completely client-focused model is proposed. Rather than a "band-aid" solution, what is proposed is a fundamental rethinking of the role and purpose of government at all levels. It is only by focusing entirely on the "client," i.e. the rate payers of this country, that scarce resources can be deployed to maximum advantage.

1993-94 Economy in Government Competition Selected Finalist's Executive Summaries--Health Care

1993-94 Economy in Government Competition Provincial Program Co-Winner

Medisave Accounts: A Plan to Reform the Canadian Health Care System

by Dr. Bill W. Weaver

MEDICAL INSURANCE INCREASES consumption and neither the patient nor their doctors have an incentive to economize. The system is increasingly characterized by line-ups and rationing. Singapore's innovation of Medisave accounts provides an existing and successful alternative. My proposal for Canada suggests that all citizens except the unemployed, the disabled and those on welfare contribute 6 percent of their gross income to a Medisave account to a maximum of $3,000 per year. These deductible contributions and the tax-free earnings they generate would accumulate to a total of $20,000. Excess RRSP funds could be used to contribute to Medisave accounts which are portable throughout Canada. When people need health care, they pay the provider, whether it is a doctor, physiotherapist, a pharmacist or a hospital. If the bill is over $20,000, government-regulated disaster insurance covers 100 percent of the costs. These insurance schemes would be operated by private insurance companies on a provincial basis. I suggest all cigarette and alcohol taxes be applied to fund this disaster insurance as these consumption patterns often lead to increased health costs.

The introduction of market forces into a government-dominated bureaucratic system will improve the patient-provider relationship while still retaining the security of disaster insurance. All hospitals, outpatient clinics, and extended health facilities would be privatized and regulated by hospital review boards--similar to the way in which the CRTC regulates telecommunications.

Public sector unions would become private sector unions, negotiating on a hospital-by-hospital basis. As health care is an essential service, strikes would be prohibited and difficult disputes settled by compulsory arbitration. Significant cost savings in administrative/support staff are available. Further costs savings can be realized in the elimination of extraordinarily detailed computer billing systems and all the attendant civil servants, as well as the Pharmacare bureaucracies. The financing and construction of hospitals would be done entirely in the private sector, also regulated by the hospital review boards.

The heart of this reform is to empower the self-interested health care consumer who is spending his or her own money. The experience of Singapore has shown that this system is financially viable while it protects all from financial disaster.

1993-94 Finalists Summaries on Health Care--Provincial Category

Health Care Insurance in Canada

by Jon Breslaw, Ph.D.

Concept

COMPREHENSIVE HEALTH COVERAGE IS provided to all Canadian residents. This is funded, in part, through payments made by employers and the self-employed to the provincial health insurance plans. While benefits derived from access to medical services paid for by the state are on a need basis, the cost to the individual is unrelated to his or her level of health or lifestyle; rather it is solely based on the individual's total remuneration. Not only is this inefficient, but there is no incentive built into the scheme for prevention. Since individuals with a healthy lifestyle tend to be fitter and consequently use substantially fewer health resources, it makes actuarial sense to relate the health insurance premium to the level of fitness. Such signals provide the necessary incentive for individuals to increase their level of fitness, and hence their underlying level of health. Given the increased demands on health services as the baby boom cohort ages, any measure that could significantly reduce expenditures in this area should be given very strong consideration.

The Problem

In a situation of fiscal constraint on all levels of government, there is increasing pressure to reduce deficits by restricting social programs. In this environment, provincial governments have acted on the supply side to reduce health expenditures, resulting in cuts in health services, and longer waits for surgery. However, a corresponding reduction on the demand side is not as easily accomplished. This is because demand reduction, instigated through user fees or the imposition of deductibles, is counterproductive, since procrastination in seeking advice or treatment for a medical condition usually exacerbates it, making it yet more expensive to treat. The aging of the population, coupled with the increase in the cost of medical technology, will place unsustainable demands on health insurance plans in their present forms.

The Proposal

In the provision of health care, prevention is far more cost-effective than is the cure, and consequently prevention has to be built into the health system if costs are to be reduced. In this context, prevention refers to the reduction in the need for health services. From an insurance point of view, it makes eminent sense to reward fit individuals, who have a statistically smaller probabilities of needing medical services, with lower premiums. Conversely, one should penalize unfit individuals, who have a much higher probability of needing health services, with higher premiums. The core of this proposal requires that individuals, who because of their lifestyle are likely to utilize more health resources than the norm, should be required to pay more than the norm, and conversely, and that the cost differential should have a direct impact on the individual.

Implementation

An annual medical checkup would be compulsory for the renewal of the health insurance card. This medical would consist of a standard checkup by a doctor, and the assignment of a Physical Fitness Grade (PFG), ranging from an "A" (excellent) to a "G" (inadequate), based on a treadmill-derived fitness classification scheme. Grades would be age and sex corrected. These tests are simple, and can be administered either at a registered fitness testing centre, or at a doctor's office. The doctor would file the fitness assessment grade as part of the fee for service, and the individual's employer would be notified of any change in the PFG by the provincial health care system. The employer would continue to contribute to the provincial health insurance plan at the median level. However, the employee would be responsible for the increased contribution if a poor PFG were assigned, and would receive a rebate if a high PFG were assigned. The rebate would not be taxable for income tax purposes, nor would contributions be eligible as deductions; thus the full impact of differential levels of fitness would be felt by the individual. For an individual with an income of $50,000 per year, the differential between being assigned an "A" and a "G" is over $3,500.

The impact of this proposal, both in terms of increased levels of health in the population as a whole, and in terms of reducing health expenditures, can only be determined experimentally. Consequently, it is suggested that the efficacy of this proposal should be evaluated though a small pilot study.

Home Health Care

by Lois Ward

The Existing System

IN CANADA, WE HAVE EXCELLENT HOME HEALTH Care Services provided by agencies such as VON, Community Nursing Services, ParaMed Health Care, Red Cross Homemakers and many others. These agencies provide service for local Home Care Programs under a "brokerage" model. Thirty-eight home care programs throughout Ontario contract with the various agencies and administer the programs. This system has many benefits including: competition between "private, non profit" agencies, which ensures high quality service at a competitive prices; little government intervention in direct service; high quantities of volunteerism; highly focused service "specializing" in their area of expertise; low administration costs; and the administration of each agency by a local board.

The Problems

Two problems with this system are that the consumers (mostly seniors) do not know what agency to call or how to access service and that each agency (Home Care, VON, Homemaking, et cetera) has their own assessment form so that a senior requiring many services may end up answering the same questions over and over. This is inefficient and frustrating.

The Non-Solution

As a solution, Ontario's NDP government considered "taking over" all the "non profit" agencies and slowly eliminating the private sector by creating Multi Service Agencies (MSAs) to provide all administration and service under one roof. These MSAs were to be unionized and would have created huge monopolies which I believe would be more costly, bureaucratic, and a drain to the taxpayer. In other provinces, agencies such as these have caused visit costs to double. With one third of our tax dollars going to health, the NDP could have created a monster we could not afford.

The Proposal

I believe simple changes to our existing system would solve the problems at very little expense.

My proposal is this:

1. Introduce a single 1-800 number for each home care program to receive all referrals for service to all agencies and provide information on what is available in each county.
2. Assign one "case manager" to each person requiring service. He or she would determine the consumers' needs and arrange all required services.
3. Develop one comprehensive assessment tool for case managers that would meet the needs of all services required in the home. This would prevent repeated "history taking" by each agency.
4. Link the agencies and Home Care through a computer system and fax network to ensure speed and accuracy of information flow.
5. Compile a directory listing all the agencies and services provided, even though access to these agencies would be through the single 1 - 800 line.
6. Encourage innovation, high quality service, and efficiency by maintaining a competitive "brokerage" model among existing agencies.

This proposal would build on the strengths of our existing services, streamline access and keep the government's "midas touch" out of our health care system.

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