Health Law Blog

Cuts in Residency Positions Another Blow to Health Care

November 17, 2015

In yet another example of market failure as it relates to Canada’s health care system, the Ontario government is cutting 50 residency positions across Ontario. The first 25 cuts will occur in 2016 with an additional 25 scheduled for 2017. Inexplicably, this is happening at a time when, according to Ontario Medical Association (OMA) president Dr. Mike Toth, 800,000 Ontarians are without a family doctor and the population of the province is increasing by approximately 140,000 annually. Demand for physician services in Ontario is currently not being met by sufficient supply. However, this latest move will serve to further undermine an already bad situation, both in the near term and in years to come, when Ontario’s growing and aging population places increasing demands on the health care industry.

These cuts curiously come at a time when federal health care funding to Ontario is at its highest level ever. During the 2015-2016 fiscal year the province is to receive $13 billion, an increase of $735 million from the prior year. Yet, despite this increase, not to mention the political rhetoric that goes along with it, the Ontario government has only allocated an additional $600 million to health spending. In other words, the Ontario government is spending less new money than it is receiving, while at the same time it is complaining that federal health care transfers are insufficient. The Province is under severe budgetary pressure as it tries to come up with at least $10 billion per year in order to service its massive accumulated debt, the result of years of excessive spending. The missing $135 million is clearly being redeployed towards other budgetary and political priorities, rather than to satisfying unmet demand for health care services, despite the fact that these funds were essentially “earmarked” for health care. 

Shae Greenfield, a spokesperson for the Ministry of Health and Long-Term Care, has defended the cuts, saying that since 2004, the province of Ontario has “significantly improved” the supply of doctors by increasing the number of first-year residency/post-graduate spaces from 639 to more than 1,200. While Mr. Greenfield’s statement may play well to the uninitiated, it nevertheless leads to concern over the government’s supply management decision making. As history demonstrates and the OMA’s Dr. Toth points out, that seldom ends well. One need only look back to the early 1990s when medical school enrolment was cut, resulting in a significant shortage of doctors by the time the new millennium dawned. Hundreds of thousands of Ontarians were left without a family doctor and wait times for surgery or to see a specialist soared. Indeed, wait times are creeping up again.

What we are seeing now is another example of why centrally planned economies fail to perform at the same level as market-based economies. Without some sort of market-based mechanism in place, Canada’s ability to provide quality health care will continue to deteriorate. Instead of allowing some degree of market dynamics to prevail, health care funding is held hostage to political priorities when it should be a function of need. Because there is no pricing mechanism in place for health care services, demand is artificially enhanced and supply becomes a function of the government’s central planning process. In this paradigm, the “correct” level of medical services offered in the economy essentially becomes the politically “correct” level, i.e. the level the government can get away with, without incurring too much political cost. This political cost-benefit analysis can be seen applied in other areas, i.e. generous pay-outs to Ontario teachers who, in turn, deliver significant political benefits, such as massive advertising campaigns conveniently timed during provincial election periods. If supply-demand decisions in any economy or sector of the economy become political cost-benefit decisions, any such economy or economic sector will become completely dysfunctional. Welcome to today’s Ontario.

It remains to be seen how much of an impact the cutting of 50 residency positions will make, but given population growth and demographics, the result will not likely be good. Unfortunately, we’ll never know the precisely “correct” number of doctors unless some sort of market mechanism is allowed to operate, supplanting overbearing central planning and politically motivated decision making.


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