The Nova Scotia Legislature

The House resumed on:
September 21, 2017.

Public Accounts -- Wed., June 21, 2000

[Page 1]



8:00 A.M.


Mr. John Holm

MR. DAVID MORSE (Chairman): We have two of our three witnesses here and all of the committee members, so it would seem like it is appropriate to start. The subject this morning is Pharmacare. Perhaps I could ask the witnesses to introduce themselves, and then we will do an introduction of the members for the viewing audience.

MR. DEREK DINHAM: I am Derek Dinham and I am Executive Director of the Insured Programs branch, Department of Health. Part of the mandate of that branch within Health is the Seniors' Pharmacare Program, as well as a number of other insured programs.

MR. CHAIRMAN: I think, afterwards you are going to have a presentation, Mr. Dinham?

MR. DINHAM: Yes, that is right.

MS. ELEANOR HUBBARD: Good morning, my name is Eleanor Hubbard and I am the Director of Pharmaceutical Services for the Department of Health.

MR. CHAIRMAN: And for the Auditor General's Office?

MR. DAVID PERRY: My name is David Perry. I am an Audit Manager with the office.

MR. CHAIRMAN: I should perhaps introduce myself. I am David Morse and I am stepping in for our regular Chairman today. If the members could perhaps introduce themselves.


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[The committee members introduced themselves.]

MR. CHAIRMAN: I will turn it over to Mr. Dinham or Ms. Hubbard for a brief presentation.

MR. DINHAM: What we usually do in these presentations - and I think this is our third or fourth presentation for Pharmacare - is to attempt to give a brief overview of the program itself, what has occurred over the period and more of an awareness update on the program content. We have 10 or 12 slides that we will be using as part of the presentation, all of which you have. Any questions you may have during the presentation, please don't hesitate to ask for clarification. We will be trying to go through, very briefly, a very complex program, particularly as we do it from an historical perspective. We will be using some of the financial information, but more so on some of the initiatives that have occurred over the last number of years.

The first slide relates to an historical overview of the cost of the program itself. There is a lot of information in here. I think we have to be careful of what we call this, whether it is estimate of cost, budgeted cost and so forth. The program started in 1974-75 at a cost of about $7 million. At that time, we had 77,000 seniors who were eligible for the program. Over the years a number of changes were made to the program, not only in terms of the financial side - and this is contributions by seniors - but also the management element of it; what was done from a qualitative and quantitative program content as opposed to the dollars and cents issue itself.

The program's current cost in 1999-2000, we had 103,000 seniors registered, of which government paid approximately $80 million or 78 per cent of the total cost and seniors contributed, through co-pay and premiums, approximately $22 million or 21.6 per cent. The total program costs amounted to $101 million. What we are projecting this year, if indeed we didn't make the changes that were announced in the budget, the total program costs would be $113 million, and government would have to contribute, as a part of the current funding arrangement, $90 million or 80 per cent, and the seniors would contribute approximately $22 million or 20 per cent of the total cost. There were a number of challenges put forward to us in trying to meet fiscal requirements of Health and of government. As a result there were changes in the co-pay - which we will get into a little later - which then brought the government costs to approximately 73 per cent of the total program cost, and seniors contributed approximately $30 million or 26 per cent.

The percentage break-outs, in terms of actual costs, as a result of the changes made brings the program in line with the historical division of costs, since the premium program was introduced and the changes in the funding arrangement, going back to 1995-96. Generally speaking, after the first completed year of the program, the cost split, in terms of actual payments, was approximately 26 per cent to 27 per cent seniors and government contributed 72 per cent to 73 per cent.

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Looking at this in a graphical format - and again this is total costs as opposed to government costs - over the years the program has changed in cost, obviously, and certainly if indeed there were no actions taken, whether in terms of the program management or the cost-sharing arrangements, we would be in a situation this year of having a program cost in the vicinity of about $250 million. In actual fact the total cost, regardless of who paid for the program, was less than half of that amount, and we are looking at a $110 million-$111 million expenditure, and it is significantly less than what it could have been.

The next slide relates to the cost-sharing arrangement. The upper line is the total program cost, the next line is government cost - and this is what we indicated being around the 73 per cent to 75 per cent range - and the bottom line is the cost of the seniors for the program. We see it over a time, and both elements are going up but, again, in terms of relative percentages, in terms of actual costs, it has been fairly stable.

One of the questions that is often asked is, why are drug costs going up, regardless of who funds the program? We do have some examples of some of the elements that contribute to the cost increases. Certainly the increasing seniors population is going up faster than the general population overall. Increased drug use, and this can be looked at, it will drive the cost, but there are a lot of positive elements in this. The appropriate use of drugs is still probably one of the most cost-effective health interventions and prevention programs. We had to be careful that even though we look sometimes negatively on the cost side of drugs, it is a very cost-effective health program. The rising cost of existing drugs, certainly those that are on the market, and we see annual increases in the cost of these drugs.

We have to keep in mind that Canada represents a very small percentage of the global cost of drugs. We are really dealing with international drug companies and these are getting larger as we see more and more consolidations. The influence of Canada and Nova Scotia on the pricing structure is fairly minimal. However, as a country and collectively as provinces, we do try to lobby to try to moderate cost increases. New, more expensive drugs are entering the market place replacing current drug technologies, and we do have an example of this which shows what the impact of changing technology and new drugs will be.

Drugs replacing medical interventions: drugs in many cases do replace surgical interventions replacing admissions to hospitals in the first place as a preventative or an intervening measure into the treatment of disease. Early discharge from hospitals: a number of years ago when we did have a reduction in patient days, patient admissions and beds, we did see a significant increase in the cost of the drug program itself. We did an in-depth analysis of the impact of reduced admissions a couple of years ago and this contributed in the vicinity of $1.5 million to $2 million per year as a result of that. We have to realize that as seniors are in hospitals the drug costs are covered by the Hospital Insurance Plan, and as admissions are deterred or a day stay reduced, the cost shift moves from the hospital sector to the Seniors' Pharmacare Program.

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Bill C-91 is another contributing factor, and again studies have been done to look at the impact of changes in federal legislation and that has had an impact on the costs of the program itself. We will show you some examples as to what technology, new drugs, are having on the plan itself and the challenges that lie ahead for us. Some of the examples that are here, the drugs are not necessarily insured as yet, such as the first example that we use, but certainly as a province, where other provinces have insured some of these drugs, there is going to be significant pressure for Nova Scotia to include it as a benefit under its program.

We use a few examples here. These are some of the high-incident diseases for seniors. The first, as we go across, we look at some of the disease entities, the current cost per month, and this is looking at the old treatment; the cost per month for a new treatment, this is the use of new or improved drugs; and the annual cost difference in the old therapy versus new. As an example, arthritis, which is probably upwards of 10,000 or more, seniors do have problems and needing intervention, the old therapies using drugs related to Ibuprofen, cost in the vicinity of $4.60 per month. A new drug has entered the market place, Celebrex that you have probably heard quite a bit about, certainly it is an improved drug but, on the other hand, it comes at a significant cost increase. The monthly cost of this therapy would amount to approximately $40. Looking at this on an annual basis the increased costs per senior who would be on this drug therapy, per year, $430; a significant increase when you look at approximately 10,000 seniors who may be eligible for this drug, or an annual cost increase of about $4 million to $5 million; 4 per cent to 5 per cent as related to one drug for one therapy.

I will not go through all of these, but you can see the treatment of high blood pressure as an example. The new therapies is coming out, ACE inhibitors and so forth. The annual difference would be in the vicinity of $330 per month. Cholesterol, diabetes, osteoporosis and the final one, Alzheimers, there is currently not a drug on the benefit list that would have an impact on Alzheimers or the progression of it, but a new drug, Aricept that is in the market place now and, again, it has been in the media on a number of occasions, Aricept would cost approximately $150 per month per senior. The annualized cost of the treatment in terms of use of drugs would be slightly less than $2,000. We may have in the vicinity of 2,000 or 2,500 seniors who may be eligible for such a treatment if indeed it becomes an insured service which would cost in the vicinity of about $3.5 million to $5 million per year.

These are just a couple of examples. On the market place now and in the queue to be approved by HPB there probably is in the vicinity of 25 to 30 distinctly new therapies with fairly significant cost implications. It is not uncommon when we add these together that a senior could use all of these drugs and, again, if you look at that scenario of the current costs of approximately $50 per month for the group of disease entities moving to $4,000 per year. Anyway, these are just some examples of what we are facing and the challenges ahead.

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As we said earlier, program management and, again, I will try to keep it brief and not go into these in any detail, but we do have a number of programs that have been introduced to look at the non-financial elements of the program itself. The Drug Evaluation Alliance of Nova Scotia which was developed a couple of years ago is a group of professionals with a mandate to promote appropriate prescribing and utilization of drugs. Over the last year or two there has been a significant impact on utilization of Benzodiazepines, asthma drugs and drugs related to diabetes. The cost savings there and improved utilization of drugs has made a significant impact on the program itself. The Formulary Management Committee, which is a group that approves all new drugs and/or limitations on the insurability of these drugs, has been in effect for a number of years and all new drugs and even current drugs on the formulary are reviewed periodically to determine its appropriateness for insurability.

There is a Health Education Committee which is a group of seniors, representatives of the pharmaceutical and medical community, drug manufacturers and so forth, that attempts to educate seniors and other groups on the appropriate use of medications. The Atlantic Cooperation, there are a number of initiatives that have started this year, but have been ongoing for the most part in terms of coming up with initiatives based on input from the four Atlantic Provinces and certainly there is opportunity here to make collective improvements in drug plans based on input from the four Atlantic Provinces.

The federal-provincial-territorial initiatives, there have been a number of working groups to look at a wide range of issues such as the cost drivers of the drug industry, drug utilization, a review of non-patented and generic drug prices and a number of initiatives that you can go through outlining the attempts from an interprovincial, national level to help us in determining policy and having influence on the costs of the program itself. These are some of the management initiatives that have been put into place over a number of years. Finally, you have a number of slides here looking at the changes in the program content from a financial point of view, over the last number of years. In 1974-75, when the program was introduced, the program was totally open-ended. That meant that any drug that was prescribed by a physician, other than a few exceptions, were covered under the program and paid for 100 per cent by government. In 1986 a program called Actual Acquisition Costs was introduced; prior to that there were prices established by the drug industry itself, catalogue prices that varied considerably from one end of the province to the other.

What was done through negotiations with the Pharmacy Association and its membership, which represents approximately 250 pharmacies in the province, we did reimburse pharmacies, based on their actual acquisition costs, what they paid for it. In addition to that there is a dispensing fee that was negotiated at the same time, so there is no mark-up in the cost of the drugs themselves, it depends on what they pay for it. Now there will be differences depending on the volume of business that a pharmacy or group of pharmacies do, but it is based on their actual acquisition costs, no mark-ups.

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In 1990 we introduced a program called Maximum Allowable Cost which, for like drugs, whether brand-name products or generics, there was a cost limit established by the department, in consultation with the drug industry to establish an upper limit on the price. This will allow a fair amount of flexibility within that price range for consumers and prescribers to use drugs as flexible as possible, but is within the price range established by the province. In 1990, as well a co-pay was introduced, a $3 per prescription across the board.

In 1991 drug applications were made to be mandatory; that is, before a drug could be included as a benefit under the program, it had to be reviewed by the Formulary Management Committee. This again resulted in a number of actions; not all drugs were included in the formulary as a benefit; some were included as a benefit, but under certain strict conditions; provider fees - this is the dispenser fees - were frozen for two years starting in 1991; and the co-pay was changed to 20 per cent of the total cost to a maximum of $150 per year, which we felt was more representative of the cost-sharing relationship that was originally introduced.

In 1993 the co-pay maximum, although the co-pay remained at 20 per cent, was changed. If you were in receipt of the GIS, the maximum remained at $150, but non-GIS recipients, the total cost in terms of co-pay was increased to $400. In 1993 the province became insurer of last resort for certain clients who had a coverage under other programs. These are programs that are covered under federal legislation; this included veterans groups and status Indians. The question here is not that they were taken off the program as much as their costs and their benefits were moved from provincial coverage to federal coverage and payment for those services.

In 1994, pharmacists accepted a fee rollback of approximately 6 per cent, and in 1995 the Premium Program was introduced - and I am sure everybody is aware of the details of that - the $215 plus rebates available as well as other criteria related to that program. As well that year we moved to an on-line computer system interactive. It had to be done to bring in the use of modern technology, but with the maximums in the co-pays and so forth it was the only way that we could be responsive to coverage and the co-pay maximums and be somewhat user-friendly and responsive to the needs of seniors.

In 1996, a new formulary was published and this outlined in detail the benefits covered under the program, as well, it cleaned up the old formulary. There were a lot of drugs on there at that time that were no longer used, or used in a very limited or restricted manner.

The pharmacists' fee was reduced. I think it was approximately 5 per cent that year. In 1998, a minister's working group provided a report regarding future options to pursue in terms of changes in the program content, management of that program and options for changes in the financial arrangements.

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In 1999, the 50/50 cost-sharing relationship was included in regulations related to the premium, and rearranged co-pay provisions were changed. Insurer of last resort was further expanded at that time to include private insurers. What was done in the couple of years prior was those who were covered under federal government legislation were included, but in 1999 this was included, private insurance.

A number of groups were impacted by this. The retired federal civil servants group, the Public Sector Health Care Plan, which amounts to approximately 7,000 or 8,000 seniors in Nova Scotia was moved from coverage under the provincial plan to coverage under their private plan as seniors. As well, large corporations were also impacted by this if indeed they had benefits offered in other jurisdictions.

Finally in 2000, co-pay was changed to reflect the cost increases, as well as the cost-sharing arrangement. The co-pay was increased from 20 per cent to 33 per cent to a maximum of $350. You should be aware that over the years, a five year period, there has been no change in either the premiums or the co-pay per cent or total contributions. This remained constant for a five year period despite a number of presentations made to a variety of groups to attempt to address the changes in the percentage contributions.

The final slide we have is a very quick overview of a couple of provinces, New Brunswick, Prince Edward Island, Newfoundland and Saskatchewan, as to what their program content is about, particularly in terms of premiums, co-pay and so forth. Our goal is to maintain a universal program for all eligible beneficiaries in Nova Scotia that is not based on income levels and, as a result, we did not pursue the option of a program coverage based on income levels. Whether it is those in receipt of the GIS versus non-GIS or any other proxy, the program is still universal in nature.

In comparing this to many of the other provinces, particularly, New Brunswick has a fairly high premium for non-GIS seniors, and the maximum contributions are fairly significant in terms of co-pay and the annual maximums. Prince Edward Island has a fairly high front-end co-pay arrangement, although they do not have any premiums; there is no maximum in the amount that seniors can contribute. Newfoundland has a program for GIS recipients which amounts to approximately $5 per prescription, which is about a 20 per cent co-pay, plus 10 per cent in addition to this. No maximum in the co-pay amount and Newfoundland does . . .

MR. CHAIRMAN: Excuse me, just for the benefit of the viewing audience, could you explain what GIS means?

MR. DINHAM: GIS are those low-income seniors who receive a federal supplement. It is a Guaranteed Income Supplement.

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MR. CHAIRMAN: Thank you for that clarification. I am not sure whether you said that but I thought it was important to make that point.

[8:30 a.m.]

MR. DINHAM: In Saskatchewan there is a significant premium attached to their program, whether you are in receipt of the Guaranteed Income Supplement or not, plus a significant co-pay with no maximums. We picked these provinces because of their size and their capacity to pay as much as anything else. I think as you look at the benefits in Nova Scotia, it compares very favourably with these programs. We don't have a slide, but it is attached to your package, giving a broad outline of all other provinces' coverage, benefits in terms of what is available to seniors, the general costs to the seniors as well as the maximum contributions that could occur. (Interruption) Sorry, they haven't been handed out as yet, but again, it is a brief overview of all other provinces, what they receive as benefits.

In any event, that is the end of the formal presentation. I certainly would be glad to answer any questions on this or any other issue you wish to bring up.

MR. CHAIRMAN: Thank you, Mr. Dinham. Last week I believe the NDP started with the last subject, so this week, we shall start with the Liberals. The time is 8:31 a.m. We will start with 20 minute intervals.

The honourable member for Clare.

MR. WAYNE GAUDET: Mr. Chairman, I want to go to Mr. Dinham. On your first overhead, I just want to try to get a better understanding here. You indicated that there are factors contributing to Pharmacare cost increases that had to do with increasing seniors population. I am looking at your Page 1. For 1999-2000, we have 103,600 seniors insured under the program. This year, we are basically looking at 99,900. Then a little further in your presentation you indicated that status Indians and veterans were exempt from the program. So my first question would be, could you clarify why for the current year there is actually a decrease in insured population?

MR. DINHAM: There are a number of elements related to that. The total seniors population is in the vicinity of 125,000 to 127,000. If we go back to when the insurer of last resort first occurred which is, if you go back to 1993-94 period, a number of seniors were taken off the program at that point in time and transferred to the federal program. What we call this is insured population, not necessarily the total population. But in any event, there was a benchmark that occurred at that point in time. As well, when the premium program was introduced, it was an optional program. Seniors didn't have to join which may have contributed to some opting, because of their health status or private coverage, they didn't join the program itself.

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In 1999 we saw a big reduction, part of which is included in the estimates for 2000-01, moving to insurer of last resort, for private carriers. Approximately 7,000 to 8,000 seniors are included under one program. This is the Public Service Health Care Plan. The change was introduced in October 1999, and the annualization of the insured population was spread out over a two-year period. The reason for that is we are not clear on the total take-up of that program, and the federal government is not aware of it. They do not have precise numbers. So the reduction from 108,000 down to 103,000 and then this year we anticipate that with the full annualization of that we should have an insured population of approximately 99,000 seniors.

MR. GAUDET: I just want to make sure that I understand. You indicated there are roughly 7,000 to 8,000 registered under the federal Public Service program.

MR. DINHAM: That is correct, yes.

MR. GAUDET: How many veterans? Would they be included in those numbers or would they be separate?

MR. DINHAM: No, they are not. They are included under a different legislative requirement.

MR. GAUDET: Do we have numbers on how many . . .

MR. DINHAM: Back in 1993-94, I think there were in the vicinity of 5,000 in terms of veterans and status groups moved to federal coverage.

MR. GAUDET: My next question, I am looking again at the same chart. The total cost of the program for last year, 1999-2000, and then I am looking at 2000-01, would the fact that there is less insured population under this program - the total cost we are looking at is roughly $12 million, or $12,000?

MR. DINHAM: It is $12 million.

MR. GAUDET: So my question is, the fact that we have less people covered under this program, we are seeing an additional $12 million cost in such a short time?

MR. DINHAM: Again I would refer to the factors contributing to the Pharmacare cost increases. Really, when we look at the estimated costs, we can factor out each of these items and attempt to put a cost figure to these. I think what is notable over the last three to four years is there has been a control on the program costs overall as a result of a number of initiatives, some of which are included in the management element of it and some of the cost factors, because related to costs there are utilization changes occurring as well.

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There is a limit as to what you can do. We anticipate that this year, because of the factors that we have outlined here, the costs will be going up approximately $12 million. One of the biggest factors is the introduction of new technology. We did give you two specific drugs that could add $10 million to the program itself. It depends on decisions by government and the formulary management committee whether they will be included or not as benefits, but there will be significant pressures placed on us to include those as benefits.

MR. GAUDET: I want to move further down in your presentation, to Factors Contributing To Pharmacare Cost Increases. You made reference to the early discharge from hospitals and the fact that those individuals who were hospitalized, I wasn't clear on who actually covered the drugs of those individuals while they were in hospital.

MR. DINHAM: While they are in hospital it is included in the hospital budgets. Under the Canada Health Act there are stipulations as to what is covered as part of hospitalization, and drugs that are used while hospitalized are the responsibility of the hospital to pay for these.

MR. GAUDET: Mr. Chairman, through you, do we have some indication of exactly how much cost we are looking at in the run of a year that technically the hospitals are picking up?

MR. DINHAM: Hospital costs for their entire in-patient cost would be in the range of 3 per cent to 5 per cent of their budget; low would be 3 per cent and the 5 per cent would be the higher limit. I don't have the numbers in front of me, but the hospital budgets, there is approximately $700 million, $800 million overall. The figure that we use, although we can be a bit more precise with this, is around $40 million of hospital costs go to drugs.

This year you may have noted in the budget there was some discussion, that a number of high-cost drugs were taken from hospital budgets, particularly the QE II, and transferred to the department directly. The reason for that is that the invariability of costs of these drugs would be rather significant. There was a high risk for hospitals who have a fixed budget to be able to provide these services. These high-cost drugs were moved to our branch for administration in conjunction with the QE II and hospitals in general.

MR. GAUDET: Thank you. I am just curious, do we have a breakdown, because we anticipate the fact that the $40 million that technically hospitals pick up at the end of the year, are not actually all for drugs for seniors. Do we have a breakdown on how much of that $40 million, spent on drugs, would be for seniors?

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MR. DINHAM: It has been done as part of previous reviews, but we had to be careful. We can do it on a per diem basis, but hospital accounting is not by patient, it is by averaging patient-day costs, which includes drugs as well as any other cost that goes into the provision of care. It can be done on a general average, and we could pick this up for you, yes.

MR. GAUDET: I am looking at the same overhead. Another factor had to do with increasing drug use. I am just curious, is the Department of Health basically doing some type of monitoring to find out if drug use is escalating? I am looking at Digby County for example, Mr. Chairman. In 1996-97 there were roughly 81,000 prescriptions provided to seniors. So if the department is actually monitoring this, I guess my question would be two-fold. First, is there a trend throughout Nova Scotia that shows that seniors are using more drugs?

MR. CHAIRMAN: Ms. Hubbard.

MS. HUBBARD: I will answer that question, Mr. Gaudet. The trend, not just in Nova Scotia but in all provinces, is increasing utilization of drugs. That is for a number of reasons. In Nova Scotia, we link it to the new drugs that are out there that are treating diseases that were never able to be treated before, and much more complicated treatment regimens for diseases. That is felt right across the country, and we are seeing the number of prescriptions per senior going up pretty much every year, just slightly. There is no provincial section of the province that is really much different than any other, it is pretty much the same throughout the province.

MR. GAUDET: Ms. Hubbard, if you were asked what is the average number of drugs a Nova Scotia senior takes in the run of a year, what would that number be?

MS. HUBBARD: Our average number of prescriptions are running somewhere around 26 prescriptions per person. Now that counts refills, too, so it could be two prescriptions filled monthly and you have 24. So we are running, I think it is around 26 or 28, I could check that if you want last year's number.

MR. GAUDET: I am looking at the cost control initiatives that were introduced in this last budget. Looking at the co-pay, Mr. Chairman, as you are aware, the co-pay seniors have to pay in Nova Scotia is now 33 per cent. So co-pay fees have jumped from 20 per cent to 33 per cent. The Minister of Finance has said that fees will increase, technically, close to $4.4 million. My question would be, what were the decisions that allowed them to come to 33 per cent? What were the factors that basically provided government to increase the co-pay to seniors in Nova Scotia?

MR. DINHAM: There are a number of factors that were taken into consideration, many of which are not new this year. We have realized over the last number of years the cost increases and potential cost increases for the Pharmacare Program itself and to maintain the percentage contributions over time we did have to make some changes to the program itself.

[Page 12]

As it happened, there were no changes in the co-pay amounts or premiums over the last five years.

We were also faced with the problem this year of the fiscal restraint and challenges were put out on a number of fronts in the health care sector as well as others. We did come up with a wide variety of options as to how we could live within the budgeted amount that was given to us and it was really not a budget, it is a forecast or estimate of the costs that we would incur and this was the option that was chosen. I guess there is no magic about it. We did have to live within the fiscal parameters that were given to us as well as trying to keep the program costs in control overall.

MR. GAUDET: Mr. Chairman, I will pass to my colleague. Maybe you could provide us with how much time is remaining?

MR. CHAIRMAN: You have just a little under five minutes.

The honourable member for Cape Breton East.

MR. DAVID WILSON: Mr. Dinham and Ms. Hubbard, thanks for your presentation this morning. Since we don't have that much time left, let me get right at it.

MR. CHAIRMAN: I might interject and say that there will be a second round.

MR. WILSON: I know, just for this time. The Budget Address said the cost of the Pharmacare Program in the last three years had increased from $42 million to $83 million. Is that correct? That is an increase of approximately 98 per cent.

MR. DINHAM: This was an increase in the Department of Health budget as opposed to the actual program costs itself and if you look at the budget going back in the years in question, it was established at $42 million and if you use that as a comparison to current budgets, yes, the numbers are quite correct.

With the introduction of the program itself, the $42 million was based on a cost-sharing of 50/50 and this is 50 per cent department and 50 per cent others. We had to be careful in using government costs per se because there was a rebate program both in cash and a premium reduction for low income seniors that was paid for through the Department of Finance.

MR. WILSON: Is it a fair statement for me to say that the cost of Pharmacare in this province has remained fairly stable - about $70 million per year?

[Page 13]

MR. DINHAM: It has remained stable in terms of, I guess, government costs and really overall costs. I think we had to be careful of looking at the trends. I think we have done a lot as a department and I think collectively with the Pharmacy Association and the Medical Society and seniors in general, but our options in terms of cost control or program management is quickly diminishing and we don't have a lot of options left at this time. I think we had to be careful that we address these problems earlier in order that the sustainability of the program can remain a benchmark of the program itself.

MR. WILSON: I think we are all familiar with the oversight that was uncovered. The Health Minister and Finance Minister are saying that Pharmacare rates were determined based on accurate numbers, but it seems rather obvious that the increase in the co-pay fees, which went from 20 per cent to 33 per cent, was based on an incorrect belief that Pharmacare costs had doubled. So my question is, when was that error discovered?

MR. DINHAM: Again, I am not sure if it was an error so much as the understanding of the . . .

MR. WILSON: How would you describe it Mr. Dinham then if it is not an error?

MR. DINHAM: I think it is the response that would depend on how we are comparing numbers year over year - whether it is budget, whether it is actual and when we changed the program from an entitlement to an insurance and a premium system, it became very complicated at that stage. It was cost sharing, not only with seniors but with other government departments. As I alluded to, the Department of Health paid approximately 50 per cent of the estimated cost of the program for that year as well as the rebate program in terms of premium reductions or cash payments to seniors themselves.

MR. WILSON: Would you describe it then as an oversight? And, if so, then that is a pretty large and significant oversight, is it not?

MR. DINHAM: I wouldn't categorize it as an oversight as far as determining the co-pay amounts or premium amounts. How you describe the program in trying to make it as simple as possible in terms of a descriptor, a lot of details had to be acknowledged and are not necessarily a part of that explanation. But, I wouldn't call it an oversight and I would suggest as well that it had little to do with the establishment of the premium amounts or co-pay amounts or maximums.

MR. CHAIRMAN: With that, it is time for the NDP.

The honourable member for Dartmouth-Cole Harbour.

MR. DARRELL DEXTER: I am just going to follow up on this quickly and I am not going to beat around the bush with it a bit. I mean, this was a gross attempt to mislead the

[Page 14]

public of Nova Scotia with respect to the cost of Pharmacare. It is as clear as the nose on your face. I don't know if you have had a chance, Mr. Dinham to read the submission of Mr. Ryan. Was that distributed to the witness as well? It is on our desk and he does a little history in his submission with respect to Pharmacare costs and he goes back to 1995. He looks at the establishment of the Seniors' Pharmacare Board of Directors, he talks about the changes to the regulations of the Health Services Act with respect to Pharmacare and then he says, "These Regulations provided that premiums and co-pays were to fund 50 % of the costs of Pharmacare. It was obvious from the outset that the premium and co-pays would not meet the 50 % requirement and it was obvious that no actuarial studies were done to come up with the appropriate formula."

But yet, that 50 per cent figure was what was set out in the budget. Even though every observer of the program knew that they were not going to recover 50 per cent under that program.

MR. DINHAM: If indeed premiums have increased over the years, they did start off at 50 per cent depending on Department of Health versus other contributions to the program. It did start off at approximately 50 per cent. Now the startup of the program, we are venturing into new territory and trying to sort out participation rates which would mean revenues to the province in terms of the premium contributions were difficult to determine because it moved to an optional program. It wasn't mandatory to join, but I am not familiar with the specifics of what Mr. Ryan has put forward, but certainly his concerns have been made known to the department on a number of occasions.

If indeed premiums had gone up, certainly trying to maintain that 50 per cent would have been achievable, but over the years for a variety of reasons, adjustments were not made.

MR. DEXTER: Mr. Dinham, we have the opportunity here to look back at the actuals. The reality is that in 1995-96, the government's contribution was $64 million. It was never $40 million and to say in the Budget Address that the cost of the program had doubled from $40-odd million to $80 million was just incorrect. Can you tell us that? Was it not just incorrect?

MR. DINHAM: The number that we have quoted here is $64 million as total government contributions. The $42 million was the actual budget of the Department of Health at that time.

MR. DEXTER: All I am asking you to do is to be straightforward. The $42 million figure, in actual, did not exist in 1995-96. It didn't exist. It was $64 million. That was the cost of the program. To say in the Budget Address that it was $42 million was wrong. Can you just admit that for us?

[Page 15]

MR. DINHAM: All I can say is what was in the Budget Speech was the amount budgeted for the Department of Health. The actual expenditures represent what was spent by the Department of Health and the Department of Finance. I really couldn't comment on the wording of it, but the reference to the $42 million as a budgeted figure by Health was entirely correct.

MR. DEXTER: Well, that reference to the budgeted figure for that year may have been correct. The budget for that year was wrong. It was clear it was wrong wasn't it, Mr. Dinham? It was wrong because the actuals were $64 million not $42 million.

MR. DINHAM: Again, I would assume that the budgeted amount for the combined Department of Health and the Department of Finance at that time was very close to $64 million. All I can suggest to you is the figure that was referenced in terms of the Department of Health budget was indeed what our budget was for that year.

MR. DEXTER: Mr. Dinham, one of the most frustrating things about this committee, in talking to various members of the Department of Health and other departments for that matter, is that as an ordinary taxpayer out there in the Province of Nova Scotia, we can't seem to get a straight answer, even when we can hold up the figures and compare them with what is said in the budget and they are obviously completely and totally wrong, you still won't admit that they are wrong. That is what I think does so much to damage the credibility of government over and over again is just the simple inability to say, yes this was a clear error in the way these figures were presented. They were presented for the purposes of supporting a budget document or for whatever other reason, but they weren't correct. I am going to leave it at that because I think the general population out there are the best judges of these matters.

I want to look at something which I find to be more interesting and that is the per senior cost of these programs. In 2001 according to your calculations, the projection is, under an insured population of 99,900, that the approximate cost per insured person will be about $300 per senior. The cost to government by just simple division is about $833 per senior. In 1999 the cost per senior was $212. The cost for government was $770. So the increase year over year, the increase in cost per senior to government will be $63 per senior. For the senior, it will be $87 per senior. The per senior amount of increase is being borne by and large by the seniors and not by the government. In other years, the increase was borne by and large by the government and not by the seniors. Is that fair?

MR. DINHAM: That would be correct, yes.

MR. DEXTER: In calculating the changes to the Pharmacare system, there were a number of things that you must have taken into account in making your calculations. There are two kinds of uptake on the program. One is the actual program uptake, and the other is the uptake on the drugs themselves. What we see here is that the program uptake is going

[Page 16]

down. The number of people who are opting in for any number of reasons, you have pointed out that as the insurer of last resort, people who were paying for instance private premiums for a private system may not choose to pay both premiums, and, therefore, opt out.

[9:00 a.m.]

One of the things that I have not seen anything on - and I don't know if your department has done any work on this or not - has anybody looked at what the cost increase of the premiums in the private system has been as a result of becoming the insurer of last resort? I mean, that is the natural and obvious result of transferring the cost to the private system, isn't it? They just increase their own premium? Somebody has to pay for it.

MS. HUBBARD: We are not privy to that information from the private industry. There has been speculation that those premiums will go up on the private side; however the largest group of seniors who moved to their private insurance, they were already paying their premium for it, but not getting any benefit. The largest group, PSHCP, has more members than we do seniors in this province, so it is a much larger base over which to spread the risk and any costs. They have over one million people in that plan.

MR. DEXTER: Well, that is interesting. So what you are telling me is that you don't have any data to base any kind of calculation on, but what you have heard is anecdotal evidence. That is what I heard as well, and I will tell you what I have heard. I have heard that premium costs are increasing and that they are delisting drugs, taking them off the coverage. So what is happening is that the seniors in the Province of Nova Scotia, even if they opt to go to their private plan, they are much worse off. I don't know if you saw it - I am sure the members of this committee watched with interest - the United Nations released their report on health care around the world, listing Canada as the 30th country for health care provision in the world. One of the reasons why we rated 30th was because, the UN said, the ability of our citizens to access Pharmacare, access the drugs they need at a reasonable cost.

MS. HUBBARD: The insurer of last resort policy in Nova Scotia may have some impact on those private insurance plans, but I would say the greater impact are the same ones that we described to you this morning that are pressures on our plan with new drugs, and I know with a number of the issues that you raised that are increasing costs to the private plan were planned before those seniors ever moved from our plan to the private plan. So we recognize that there may be some impact, but we would suggest that it is probably minimal in comparison to some of the other issues that private insurance is facing the same as we are.

MR. DEXTER: I would point out to you as well that among those factors contributing to cost increases, the question of things like Bill C-91 and the early discharge from hospital, these are government policy questions that have affected the cost of the program. The government, if you undertake these kinds of changes and you affect your own

[Page 17]

program as a result thereof, to then place the burden back on seniors, I would suggest to you, is wrong.

MS. HUBBARD: We also spoke against Bill C-91 and the impact it would have on our program. We estimate that we probably incur an additional cost of $1 million to $2 million every year because of that bill. As far as early discharge, it is good for the patients to get home many times and I think the patients want to get home.

MR. DEXTER: It is also good for them to get the drugs they need when they get home.

MS. HUBBARD: And they do under the seniors' plan.

MR. DEXTER: They save the government money by getting out of the hospital early, and then they have to pay more to get their drugs when they get home.

MS. HUBBARD: For the drugs in the hospital, it is actually more expensive for the drug portion in the hospital if people are discharged early, because the drugs they have to use are significantly more expensive than the ones they would use if they were in there for a longer term. So there is actually a cost, on the drug side, to early discharge in the hospitals.

MR. DEXTER: But there is a net saving to government.

MS. HUBBARD: I can't comment on that.

MR. DEXTER: I want to move to the second part of the uptake question. When the calculations were done with respect to this program, you must have calculated the uptake of the drugs by the seniors. That is the way you calculate your costs, right? You knew as a result of the premium increases that there would be a fall-off in the uptake by some seniors. Is that fair to say?

MS. HUBBARD: You mean if we increased the premium that people wouldn't join?

MR. DEXTER: No. When you increased the premium that some people would stop taking drugs.

MS. HUBBARD: The premium hasn't increased.

MR. DEXTER: I am sorry, the co-pay.

[Page 18]

MS. HUBBARD: There is that aspect that could happen. One of the stats in the insurance industry or in the drug plans is that when you first introduce a co-pay, there is a drop-off on the number of drugs that people use. When you increase a co-pay that is already existing, you don't see that same phenomenon. It could exist, but we haven't seen it yet.

MR. DEXTER: We have certainly in this House presented copies of a study that was done in Quebec with respect to increase in co-pay. Have you seen that study?

MS. HUBBARD: Yes, I have.

MR. DEXTER: Did you talk to any of the researchers about what happens when you increase co-pays and what the effect is on the population?

MS. HUBBARD: No, I haven't. I have talked to researchers, but not about this study. I do know that there is some controversy around the study and the methodology and how the researchers have attributed the entire negative factors to the drug co-pays, but once again in that study, they went from a very small, almost zero co-pay, I think it was $2 per person, to a very complicated, convoluted system of premiums, deductibles, and co-pays where, in the most recent article I read about it, the pharmacy group in Quebec were saying that up to 55,000 people every month moved from the public plan to a private plan or back again. Each time the premium deductible and co-pays had to be adjusted. I think there are other factors than just the co-pay.

MR. DEXTER: Did you know - and I am sure you know - that one of the results of the increase in co-pay is an increase in mortality? Are you aware of that?

MS. HUBBARD: Well, the study did link that, but like I say, there is some controversy around that linkage.

MR. DEXTER: But you knew that before you recommended an increase in the co-pay. You knew that it was possible, even probable, that there would be an increase in mortality rates among seniors.

MS. HUBBARD: We have a number of safeguards in place and good relations with the pharmacies really, that these pharmacists know these patients even better than we do. We have asked them to make sure they let us know if there is any patient that is going without their medication. They would have it on their files and we would know if it was being refilled or not.

MR. DEXTER: Here are your choices. Your choices are either you didn't know and you didn't calculate it because you didn't look at it which I think is reprehensible, or you did look at and you decided that any mortality that might result from an increase in co-pay was

[Page 19]

acceptable, which I think is morally unconscionable. Which of those two options did you pursue?

MR. DINHAM: I think as Ms. Hubbard indicated, there are safeguards. This is not to say that utilization may not go down or significant changes in it. But certainly, from our perspective, we do have a good working relationship with seniors groups, with the Pharmacy Association, and with physicians throughout the province. If indeed, there is real hardship for seniors not getting their drugs because of the change in the co-pay or other circumstances, staff within the department and others that are part of the provider network would intervene to ensure that this doesn't happen. In terms of our attention to individuals and individual situations, I think it has been exceptionally good over the years. It is not just this year and not just related to the change in the co-pay, this has been going on for quite some time, in terms of looking at particular hardship cases and where there are medical compromises that may occur. I assure you and others that, certainly, you have to look at the broader perspective as you make significant policy changes, but we are acutely aware of the individual needs, particularly of seniors, in providing services to them.

Keeping in mind, too, that as a part of this program we had to make a choice, do we go to a situation of maintaining universality, in terms of those who are eligible as insured residents, or do we look at making a significant divide in the entitlement process, do we cut the program off or have eligibility criteria based on income levels? Of course, once you do that, you always have the grey area of those who just go over that income level or fall just below it. Nevertheless we do have to make very difficult choices as we proceed.

MR. DEXTER: What studies do you have under way? What have you put in place in order to gather the evidence or do the analysis of the result of this co-pay, specifically with respect to mortality rate, with respect to increase in physician services, emergency room visits? What have you put in place to do that analysis?

MR. CHAIRMAN: Perhaps we could save that until the next round, you have just gone past the 20 minutes.

The honourable member for beautiful Colchester-Musquodoboit Valley on his 50th birthday.

MR. BROOKE TAYLOR: Mr. Chairman, I welcome the opportunity to participate in the Public Accounts Committee this morning. My experience has been that Nova Scotia seniors are about the fairest people you will ever meet, and Nova Scotia seniors deserve assurances that the Seniors' Pharmacare Program will continue to assist them with the high cost of drugs. I know a few years back, I believe it was 1994-95, in that fiscal year the Chretien Liberals in Ottawa cut the Canadian Health and Social Transfers. I guess I would remind all members that the original intent of Canada's medical care program was that the federal government would contribute 50 cents for every $1.00 that the province anted up.

[Page 20]

I wonder, perhaps if Mr. Dinham could tell us today, what is the federal contribution towards health care generally? I am not speaking specifically about the Pharmacare Program, but it is one and the same, as you can appreciate. I wonder if Mr. Dinham could tell us. Whereas the feds used to put in approximately 50 cents, how much per dollar are they putting into health care today?

MR. DINHAM: It is somewhat difficult to trace through the period of 50 cent dollars to where we are now because of the blending of health funding as well as other social programs. I could quote Ontario or Quebec, who have done a number of analyses on this, it is anywhere from 8 cents on the dollar to probably 12 cents to 15 cents for the health care component only. I use this as a quote. It certainly has been reduced significantly in terms of specific funding earmarked for health programs.

MR. TAYLOR: Mr. Chairman, was that somewhere between 8 cents and what was the high end?

MR. DINHAM: Eight to 12 cents.

MR. TAYLOR: Mr. Chairman, I would say that is quite astounding, when in fact the federal government agreed, originally, to put in 50 per cent or 50 cents per dollar. As you can see from our provincial comparison document that was handed out, a number of the provinces are struggling to cope. In fact, in an effort to stay within our mandate and explore whether or not we are getting good value for dollar, I note that, for example, Newfoundland, and I would share this with my colleagues to the left, and Saskatchewan have absolutely no maximum, relative to the amount that a senior in that province can pay regarding the co-pay component. Perhaps that is the reason we haven't heard of any, or at least I haven't heard of any Nova Scotian seniors leaving Nova Scotia to move to Saskatchewan or Newfoundland because of their generous Pharmacare Program. In fact, if you do the comparison and look at the numbers presented, and we take this as statistical evidence regarding the various Pharmacare Programs across the country, Nova Scotia protects all seniors who do not have drug coverage. Is that not the case, Mr. Dinham?

MR. DINHAM: That is the case, yes. When you make reference to Newfoundland, again that population base is only partially covered. One of our goals, in terms of the analysis of the program, is that the given was we will go with a universal program for all eligible seniors. That is an up-front decision that was made, and we tried to develop the principles and the component parts to meet those overall criteria.

MR. TAYLOR: Mr. Chairman, it is fine for honourable members opposite, especially to the far left, to criticize what this government is doing regarding our Pharmacare Program for the seniors in this province, but I would ask them to review the document that has been passed out so that they can make some comparison as to what this government is trying to do. I would also caution them that the Auditor General for the Province of Nova Scotia

[Page 21]

expressed concern in his most recent report about the continuing deficits of the Seniors' Pharmacare Program. He also expressed concern that government or governments in the past have failed to address the horrendous deficits that have been made.

I wonder if Mr. Dinham could explain to Nova Scotia seniors, what percentage will the seniors be paying towards the Pharmacare Program as a consequence. It was originally set up, I believe, by the previous administration to be based on a 50 per cent pay by the province and a 50 per cent pay by the senior. Even with the adjustment, which was difficult but perhaps reasonable, how much is it anticipated, as a consequence of these changes to the co-pay formula, the senior will contribute to the program?

MR. DINHAM: In the information that was circulated, we anticipate, with the changes in the co-pay for the current fiscal period, seniors will be paying approximately 26 per cent and government 73 per cent. Going back a couple of years, this was exactly what it was in the period from approximately 1996-97 up to 1997-98, in terms of contributions. The last year, 1999-2000, the percentage was 21 per cent, but with the changes, we are looking at approximately 26 per cent. If they weren't made, seniors would be paying less than 20 per cent.

MR. TAYLOR: What is anticipated as the overall cost of the Pharmacare Program? You probably said that earlier, Mr. Dinham, but what is anticipated for the coming fiscal year?

MR. DINHAM: For the coming fiscal year, we are looking at the government costs of $83 million, seniors contributing approximately $30 million, for a total cost of $113 million.

MR. TAYLOR: Mr. Chairman, we know demographics are changing. I was reading through some of the information I have this morning, and an honourable member in this Assembly commented that in 1974 the Pharmacare Program was estimated to cost about $7 million. Things have certainly changed and increased since that time. In fact, the honourable member pointed out that in the next six or seven years the so-called baby boomers will be moving into acute care, or their acute care needs will increase. So what future adjustment does Mr. Dinham anticipate, let's say for the next fiscal year relative to this program?

MR. DINHAM: In the Budget Speech there were references that future changes would be tied to any changes in the overall program costs and there would be some index developed to do that. This would be an option but certainly at that time we would have to reflect on the outcome of the current changes on overall program costs and some of the non-financial issues such as, I guess, participation rates and things of this nature. We have to keep a very close eye on that to see if indeed there is the expected percentage of seniors participating in that program. What the changes may be in the future is hard to sort out, but I think the way it is set up now there is that opportunity for predictability in terms of those changes and, if the changes are introduced, they will be done in a more fluent fashion.

[Page 22]

MR. TAYLOR: Mr. Chairman, I am just wondering, with the anticipated federal election sometime down the road, if we do see reinstatement from the successful federal government or, in fact, this federal government, how would that impact? If the federal government were to restore the CHSTs to, let's say, the 1994-95 level, how much would that mean approximately, does Mr. Dinham know, . . .

MR. DEXTER: On a point of order, Mr. Chairman. He is asking the witness to speculate about something that might happen in the future, instead of answer questions based on the value of a program that is already in place; it is an inappropriate question.

MR. TAYLOR: On the point of order, Mr. Chairman, I think we have established that the federal Liberals in Ottawa cut the CHST - and the honourable member should know that - and as a consequence this province has had to make some pretty difficult decisions, as has the previous Liberal Government, regarding this Pharmacare Program. Different Parties, and perhaps even the one in Ottawa, are pledging to restore the CHST. I am asking our witness this morning should that happen, because it is very much in the news, does . . .

MR. DEXTER: Speculation.

MR. TAYLOR: The honourable member can call it speculation, but we are talking about value for dollar. If those CHSTs are restored to the 1994-95 level, Mr. Dinham, how do you think that would impact the Pharmacare Program?

MR. CHAIRMAN: We are speaking on a point of order here. I appreciate what the honourable member is trying to get at with his line of questioning, but he is asking the witnesses to speculate on potential changes, and our role is to examine the historical value for money. So if you want to pursue this line of questioning, I would ask you to frame the question in a . . .

MR. TAYLOR: Perhaps I could frame it a different way. The federal government cut the CHSTs in 1994-95. Now, Mr. Chairman - please, permit me to continue - as a result provincial governments across Canada had to adjust the various health programs and other social programs, education, because of that drastic cut. Perhaps I could place the question this way: If in fact, and you can call it hypothetical or speculation, the CHSTs were restored, and just hear me out, Mr. Chairman, if the CHSTs were restored to the 1994-95 level - I am not going to ask about this particular program - does Mr. Dinham know what that would mean to the Province of Nova Scotia then, just in general what would that mean to the province in terms of dollars?

MR. CHAIRMAN: I think we tend to be going down the same path, and I can see that other members are looking at me and I would tend to agree with them that it is still speculative.

[Page 23]

MR. TAYLOR: Mr. Chairman, I respect your ruling. I yield to my honourable colleague, the member for Pictou East. Perhaps he has a few questions that he would like to ask.

MR. JAMES DEWOLFE: Thank you, Mr. Dinham and Ms. Hubbard, for your presentations and your remarks here this morning. I, too, would also like to congratulate my colleague, the honourable member for Colchester-Musquodoboit Valley, on his one-half century achievement. Does that sound better?

MR. TAYLOR: I feel like a senior.

MR. DEWOLFE: Mr. Dinham, you mentioned in the course of your presentation that our goal is to maintain universal coverage and the honourable member who spoke before me, brought to the attention of this group that Pharmacare programs were originally intended to be a 50/50 cost share arrangement, yet we have 72/28, 78/22, and so on. When you look at the economic and the financial issues related to the rising costs, and those cost drivers as you indicated during the course of your presentation were new expensive drugs, new wonder drugs, and also the growing senior population and so on, in your mind, could you tell this committee how Nova Scotia is doing in this regard, with respect to managing these issues, and ultimately to ensure that Nova Scotians have a sustainable Pharmacare system for our future?

MR. CHAIRMAN: That was directed to Ms. Hubbard?

MR. DEWOLFE: All right, we will direct that to Ms. Hubbard.

MS. HUBBARD: The increases in our Pharmacare Program have grown steadily over the last 10 years, approximately. We have put a number of program managements in place, and we continue to work on that front. It has been mentioned before, you can either increase revenues or decrease expenditures. The pressures on the program do cause expenditures to increase as the cost of drugs rise, as the number of people joining increase, and as the number of prescriptions they take increases. We are forecasting about a 12 per cent increase in the program this year. Last year, it was significantly less than that because we moved to insurer of last resort, but we can anticipate, over the next number of years, that that continues to rise. Just for comparison, a number of other provinces across the country we have talked to, their Pharmacare Program costs, last year, increased anywhere from 15 per cent to 20 per cent of total cost. So, we have done fairly well in keeping the total cost of the program, regardless of who pays, down from what the other provinces are paying.

MR. DEWOLFE: Thank you. Maybe, just to follow along, if I might, you mentioned program management as was in your presentation and on slides and the emphasis on the education and promotion of these programs. How would you suggest they will reduce

[Page 24]

demands on the Pharmacare system and ultimately make Pharmacare more efficient, more affordable to Nova Scotians in general?

MS. HUBBARD: Pretty much all of our program management initiatives lean toward education, not only the public but physicians and pharmacists. There are approximately 20,000 drugs on the Canadian market. That is a lot of drugs for physicians to remember and prescribe appropriately to every senior that goes in. So we are looking at ways, providing them with tools to help manage that process, and for pharmacists as well; also for seniors to know what they should be taking and how they can be best treated to make informed decisions.

[9:30 a.m.]

MR. DEWOLFE: If I might make a suggestion too. I can relate to this because of someone very near and dear to me. Approximately four years ago I took that person to Halifax to get drugs regulated, and at that time he was on 17 pills a day. By the time he left Halifax, approximately two weeks later he was on five. So the education has to extend down to the physician level. Ultimately, they play a major role in this, in handing out drugs, so that is a big factor.

If I might just bump quickly over to, you mentioned you are realizing some savings in the Pharmacare system as a result of the initiative put forward by our Premier and this government regarding the insurer of last resort, and I am just wondering how much savings would you suggest we could incur as a result of that? What would be the savings that we might appreciate from that move?

MR. CHAIRMAN: And that is to Mr. Dinham?

MR. DINHAM: The determination of beneficiary levels when you move to insurer of last resort is difficult at best. I think you will see, as statistics indicate, that the impact of that will be felt not only in the previous fiscal period when it was started - and it was started halfway throughout the year - we will see the overflow this year because of it.

When we move to insurer of last resort, to a certain extent you can identify the direct beneficiaries of that. You have the spousal implications because most of the private plans have a spousal benefit package as well, and trying to sort through this, who is eligible and who isn't. There is a lot of information. Nova Scotia has a very detailed database, but you only can tell so much. We do have some good statistics on benefit levels by some of the national carriers and particularly the retired federal civil servants.

To get back directly to your question, there are some uncertainties related to it. We are looking at the initiative that was done last year that would generate savings in the vicinity of about $7 million to $8 million. If you look at the cost increase from the year prior to that,

[Page 25]

1998-99 to 1999-2000, it levelled out, if you add back to that number the inflationary cost drivers, $7 million to $8 million is a reasonable estimate. This is without loss of benefits to the individual, it is a shift of responsibility from one government to the other.

MR. CHAIRMAN: That answer took us a little over the 20 minutes.

The honourable member for Cape Breton East and I will suggest seven minutes.

MR. DAVID WILSON: Thank you, Mr. Chairman. A couple of comments before I get to my questions, Mr. Dinham.

Referring to what some of my colleagues have said here today, I think there is a - and I am sure you are quite aware of it and I am sure Ms. Hubbard is quite aware of it as well - human element to all of this, correct? It is our seniors in this province. This is not just about managing systems and it is not about making something more efficient, more effective; this is about taking care of our seniors in this province. This is about taking care of the people who are responsible for us being here in the first place and it is about, I know, making sure that system is going to be there for every Nova Scotian when they become seniors and so on and so forth.

Having said that, we have been speaking with seniors and pharmacies as a Liberal caucus throughout the province and there are some reports that I have to tell you that are causing alarm and considerable hardship for seniors in this province from what we have heard. There are some seniors who are choosing not to get medication instead of paying the higher fees; there are some seniors who are apparently, from what we have heard, cutting their pills in half in order to make things stretch out, again because of the increase, and I am sure that you are aware that that is probably going to lead to more sickness among seniors. It is going to lead to longer hospital stays, more visits to doctors, and in the long run I am sure it is going to cost our health care system more money because of what is happening. We have heard that evidence as a Liberal caucus that this is happening, but by increasing Pharmacare fees, the government is forcing seniors into what we feel is an inappropriate level of health care. So my question is, is the department aware of any examples of seniors who are not getting much-needed medicine because of the increase in Pharmacare fees?

MR. DINHAM: We don't have any specific examples that that is occurring, but as we indicated earlier, there is a formal/informal network of elements out there that will react to any negative changes. The other question that comes out of this, of course, is the appropriate use of prescription drugs. We get as many comments back from seniors that now that the cost has gone up, I am going to really tell my pharmacist and I will tell my physician what specific drugs I am on. We have heard this on a number of occasions that maybe we will have an overall look at my prescription levels, the types of drugs, and possible interactions because we also have to look at the other side of the equation as well, that 20 per cent of hospital

[Page 26]

admissions may be a result of inappropriate use of drugs and inappropriate in terms of drug interactions.

MR. WILSON: Are you talking about abuse of drugs?

MR. DINHAM: No, I am not talking abuse of drugs whatsoever. This is a normal awareness of drug interactions, and as Ms. Hubbard pointed out, there is a huge number of drugs out there. Seniors, like many others, do receive treatments from a number of physicians; it is not just the family physician these days. There is a range of specialists and sub-specialists and different venues to get treatment. So trying to keep track of all this is difficult for the provider groups. Seniors, however, are bringing it to the attention of their providers, whether it is a pharmacist or a physician, to look at possible alternatives or possible drug interactions.

MS. HUBBARD: If you have any specific situations that you know of, if you could forward them to our attention, we would be happy to deal with them.

MR. WILSON: I will. You are relying on an informal network to tell you all this information and to take care of a problem that may be occurring in this province? Doesn't that make you a little bit . . .

MR. DINHAM: It is not just informal. It is a combination of formal and informal processes. The formal element of it is that all drugs have to be prescribed. The second formal part of it is that in order for them to be dispensed, it has to be through a pharmacy and there are very detailed records of drug utilization there, repeats and so forth, and pharmacists know their community, as well as physicians, very well. That part of it is very formalized. What isn't formalized is the ability of the system to know what income levels, what they can afford and what they cannot afford, but again that part of it is done through the local community network of pharmacists and physicians and certainly . . .

MR. WILSON: Sorry, are you finished? I am running out of time.

MR. DINHAM: Yes, seniors are not hesitant about coming forward, I assure you and I think we do have to recognize that.

MR. CHAIRMAN: A short snapper.

MR. WILSON: Yes, one short snapper. On future Pharmacare fee increases, based on the rate of growth over the past three years which is indicated by the Finance Minister himself, by the year 2003-04 the Pharmacare premium will be $430, the maximum co-pay limit will be over $700 based on that. So how can you expect seniors to absorb those kinds of massive increases down the road?

MR. CHAIRMAN: We are out of time, a very quick response.

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MR. DINHAM: I cannot see how you come up with those numbers over a two to three year period. Even if you base it on the highest costs, it would not . . .

MR. WILSON: They are not my figures. They are the Finance Minister's figures and if you extrapolate them, that is what you come up with.

MR. CHAIRMAN: We are past time.

The honourable member for Dartmouth-Cole Harbour.

MR. DEXTER: Mr. Chairman, I am going to be brief and then hand it over to my colleague. I want to say up front, we recognize that when you come here much of what you have to respond to is as a result of policy decisions you are handed that you have no control over. I am sure you work as hard as you can with the resources you have. We recognize that when you are called before this committee.

The regulations provided that premiums in co-pays were to fund 50 per cent of the cost to Pharmacare. Is that still the regulation?

MS. HUBBARD: No, it is not.

MR. DEXTER: Okay, when was that changed.

MS. HUBBARD: Last year; April 1999.

MR. DEXTER: The new formulations, how are they arrived at?


MR. DEXTER: The question of what percentage is going to be covered by premiums and co-pays, what is the formulation, what is the current policy?

MS. HUBBARD: There is no formula. As far as the premium, they didn't want the premium changed, they wanted that to remain and for low-income seniors not to pay a premium, and to look at the utilization side of things, which is the co-pay side. We put forth a number of options and one was the 33 to 350 was chosen.

MR. DEXTER: My understanding was they also announced, at the same time, that further premium increases were going to be tied to further increases in the program costs. Is that not correct?

MS. HUBBARD: They talked about an inflationary index that would be linked to increases in utilization, I believe; costs in utilization.

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MR. DEXTER: So does that mean the co-pay is going to continue to increase or that the premium is going increase.

MS. HUBBARD: It could be a combination. It could be one or the other.

MR. DEXTER: You don't anticipate any deflation with respect to Pharmacare costs?

MS. HUBBARD: If the costs went down, yes.

MR. DEXTER: But you don't anticipate that.

MS. HUBBARD: Not for this year, no.

MR. DEXTER: Thank you.

MR. CHAIRMAN: The honourable member for Halifax Chebucto.

MR. HOWARD EPSTEIN: Just to nail that down. I am not sure I understood completely the answer on that. Is the current policy of the Department of Health to try to keep the percentage payment for Pharmacare paid by the seniors at about 26 per cent, or is there some other plan?

MR. DINHAM: The question of the percentage contribution by seniors is not in legislation or regulation at this stage. Again, one has to look that it is hard to speculate in the future what policy decisions and the number of other initiatives, by government, will be undertaken. Certainly the reference to any percentage is not there and, again, is a decision government would have to make in the future. Certainly if costs can be controlled, we will do all we can to do that. It would then depend on a number of things that would draw the costs out and so forth. That is in the future.

MR. EPSTEIN: Okay. I think that is fairly clear. Let's just get to this question of what can be controlled and what can't. I am looking at your overhead that had to do with factors contributing to Pharmacare cost increases. Looking back at that it seems to me that maybe some of them are within the provincial control and some of them aren't. The one I am wondering about is your second bullet, your increasing drug use item. It seems to me that buried within that is another thought, and part of it is expressed to us fairly frequently by seniors' groups as a concern about over-prescribing. What I wonder is what, if anything, your department knows about this? What investigations you have; what is your plan to deal with it; how do you tackle this with the Medical Society? It seems to me, of course, that this has a real negative impact, I would say, potentially, on the health of seniors in terms of drug interactions, in terms of potential addictions; it certainly is a cost driver within the system. Really, what I wonder is if you can give us some comments on this.

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MS. HUBBARD: There are a number of components to increasing drug use. There is the number of people, so increasing utilization with the number of people; there is also the number of drugs a person takes. Within that, and you speak of over-prescribing, there is also the mix of what they are taking, whether it is an expensive or an older product that . . .

MR. EPSTEIN: I am sorry. We are limited in time. I understand the problem, the question is what are you doing about it?

MS. HUBBARD: If you look at the program management pages in your handout, we have three pages. Drug Evaluation Alliance, we are looking at academic detailing with physicians, we are working with them to provide them with patient profiles, drug histories and profiles. In that Drug Evaluation Alliance, for example, the alliance consists of the Department of Health, continuing medical education, continuing pharmacy education, the Population Health Research unit, the QE II. We are all working together with the same goal in mind, to improve appropriate prescribing and discourage inappropriate prescribing and utilization of drugs.

MR. EPSTEIN: Is any of this effective? They sound like very soft options, at least at the moment.

MS. HUBBARD: The three initiatives we listed here under benzodiazepines, asthma and diabetes, all have been very effective. In some cases we have decreased costs, but in other cases, improved therapy for the patient without taking anything away from them. It has been a win-win on both sides.

MR. EPSTEIN: I would hope that you continue to move more aggressively on that. Do I still have a minute, or am I over?

MR. CHAIRMAN: A few seconds.

MR. EPSTEIN: In that case, I wonder if you have actually weighted these factors that contribute to Pharmacare cost increases, for example, increasing seniors population. Clearly the population of seniors is going to go up. I assume you are not saying, either, that there is anything we can do about it, and you are not saying you don't want people to have longer lives. I am sure you are not saying that. It is well beyond our control. Increasing drug use, I guess we have talked about a little bit.

I would tie your next two bullets, rising cost of existing drugs and new, more expensive drugs directly with Bill C-91. I have to say those seem to me to be very directly tied to that last one, but it was a federal issue and beyond our control.

MR. CHAIRMAN: Perhaps we could conclude on that comment.

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The honourable member for Sackville-Beaver Bank.

MR. BARRY BARNET: Mr. Chairman, my question surrounds the issue of insurer of last resort. Let me begin by referring to a newspaper article in the Daily News, March 26, 1999. It actually quotes the then-Minister of Health, Dr. James Smith, ". . . government made a mistake in 1995 when it made Pharmacare the first insurer, thereby letting private insurance companies 'off the hook'." This initiative to move to insurer of last resort, would it be fair to say that we are now putting insurance companies back on the hook?

MR. DINHAM: I am not sure I would term it that way, but certainly the responsibility for payment has been clarified considerably. I would recognize as well, that insurer of last resort, where eligible seniors were covered by other legislated programs, was put into effect. This involves veterans and status groups. Depending on the parameters of the program itself, when it was introduced, this is the premium portion of the program; back in 1995, it originally started out as a mandatory program, everybody had to contribute to it. This was relented upon after a fair amount of debate. It is like any insurance program, you spread the risk over as many individuals as possible, thereby reducing the impact on specific individuals. In any event, that didn't happen. As a result of it, seniors were caught with the quandary of paying two levels of premiums for basically the same general level of coverage.

When we moved to insurer of last resort, particularly the PSHCP and other national groups, there was a significant reduction for seniors' costs at that time, because they certainly, for the year that it was introduced, last year, got the premium that they paid to us, they got a full refund for that and certainly their future costs - even though one could argue that their premiums on the private side may go up - their $215 annual savings is still a part of that equation. In actual fact, after we got through the transition period, it was certainly a "win-win" situation for both seniors, government, and the taxpayers in general.

MR. BARNET: With respect to the rates on the private side, the member for Dartmouth-Cole Harbour spoke about that briefly in his first remarks and he indicated that he was concerned about the fact that the rate structures for the private companies will go up as a result of the fact of this decision. Although that is a concern certainly, I would say that the biggest concern that we have right now is the sustainability of Pharmacare; that is our ultimate responsibility. In the private sector, by switching to insurer of last resort, am I correct in assuming that the seniors involved in the private sector plans are part of a rate group of existing employees and would be involved in that entire, much larger structure of employees for some of these larger companies? Is that the ordinary process?

MS. HUBBARD: It is plan-dependent, so we can't make a comment one way or the other on that; some would include them with the working employees, and some would not.

MR. BARNET: So it would be safe to assume that in a plan where the retired employees are involved with the same plan as the existing, younger, healthier employees, that

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in fact it would somewhat soften the impact, unlike Pharmacare where all those who are involved in the Pharmacare plan actually are in a situation in many cases where they are using more drugs and prescribing to this more, is that a safe assumption?

MS. HUBBARD: That is. They spread the risk over a greater number of people. The other part of it is these people were already paying a premium and not getting the benefit that their peers were getting in other provinces.

MR. BARNET: Exactly. In fact, I recently received a call from a constituent who was paying two premiums. He was paying a premium to a private insurance company and he was paying a premium to our Pharmacare system. He was somewhat shocked that he didn't have to do this. He was completely under the understanding that he had to enrol and he had to pay both premiums and he had to participate, and when he learned that in fact is not the case, that he can opt out and he can continue on with his private plan - whichever is most beneficial to him - he was pleasantly surprised.

I guess my next line of questioning is going to be surrounding what steps we have taken to make sure that those people who are contributing to both plans - a private plan and Pharmacare - know their options, know that they can opt out if that is to their advantage, and know that they don't have to pay both premiums. Frankly, I suspect that if he is out there, there is a great number of others who are out there doing the exact same thing, and probably don't understand the fact that they can pay only one and participate in only one, whichever is of most benefit to them. What steps are we taking to make sure that group of people is being well-served by the province?

MS. HUBBARD: Prior to turning 65, everyone is sent a package informing them of that and whether they wish to join Pharmacare, and their options if they don't wish to join Pharmacare. Every year when we send out our renewals, that same information is in that information package.

MR. CHAIRMAN: I want to thank you. With that - we have one other order of business here for next week - I would like to thank our witnesses for coming in, and the members from the Auditor General's office. The last order of business is with regard to the Canadian Conference of Public Accounts Committees.

MR. DEXTER: Mr. Chairman, I was just going to move that we have a meeting of the subcommittee next Wednesday at 9:00 a.m. and that the subcommittee meeting be open to all members of the Public Accounts Committee who are interested in finding out the details of what is going on with the national conference. That way, if some of the members are not available, then we don't have questions of quorum with respect to the Public Accounts Committee and yet everybody who wants to come can get the information.

I would move that.

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AN HON. MEMBER: I second that.

MR. CHAIRMAN: Would all those in favour of the motion please say Aye. Contrary minded, Nay.

The motion is carried.

I guess the other thing that would probably require unanimous consent is that the committee stand and sing happy birthday to the member for Colchester-Musquodoboit Valley, but I am nixing that one, so the meeting is adjourned.

[The committee adjourned at 9:55 a.m.]