Ontario’s health system would deteriorate if the province didn’t pump billions more into it than previously planned, says the Financial Accountability Office, shedding light on why the government recently abandoned plans to balance the budget.

Even an extra $6.9 billion over three years, announced in last year’s provincial budget, is not enough to keep up with health funding pressures and promises, Jeffrey Novak, chief financial analyst for the Financial Accountability Office (FAO), told a news conference Wednesday.

“Looking forward over the next three years, even with the additional funding from the 2017 budget, planned spending growth for existing health services will still not keep pace with population and inflation pressures, especially in hospitals, OHIP and long-term care program areas,” he said.

Health Minister Helena Jaczek later responded that it is because of such funding pressures that the budget — to be tabled March 28 — will not be balanced, as long promised, or include a surplus, as projected last year.

“We recognize that our growing and aging population is increasing the demands faced by our health care system. We need to be responsive to families that have struggled with access to care by putting patients first, and we know there’s more to do,” she said in a written statement.

“That is why we are making a deliberate choice to run a deficit, so that we can invest more in health care — hospitals, home care, mental health and long-term care — across the province,” she added.

Earlier this month Finance Minister Charles Sousa indicated there would be a budget deficit that could come close to $8 billion.

The FAO indicated something would have to give if health care access and quality weren’t going to be compromised.

But the province has few options: if it doesn’t boost spending then more efficiencies must somehow be found in already efficient hospitals, or restraints on wages and payments to health workers must remain in place.

Ontario’s hospitals are known to be highly efficient, having spent years cutting costs and now struggling with capacity problems. Emergency departments are overcrowded and frail, elderly patients are stuck in hospital beds because of insufficient long-term care and supportive housing options.

As for finding savings in payments to health workers, that’s out of the province’s hands, at least as far as doctors are concerned. An arbitration panel will begin work in May on resolving a four-year-old dispute on a new fee contract for doctors. It is expected to release a decision on an award at the end of this year or early next year.

Arbitration positions for the Ontario Medical Association (OMA) and the government were made public earlier this week. They reveal that the two sides remain far apart — $10 billion apart to be exact. The OMA wants the province to add an extra $13 billion to the physician services budget over the course of a four-year contract, ending in 2020/21. The province wants to add $3 billion.

Under a binding arbitration framework the two sides agreed to last year, the arbitration panel must take into account the impact an award would have on the sustainability of Ontario’s publicly funded health system. In other words, the panel must recognize that payments to physicians are just one of a number of funding pressures on the health system.

Health-sector spending is the largest expense item in the entire provincial budget, projected at $57.9 billion for 2017-18. That’s 42 per cent of all provincial program spending.

Hospitals and OHIP, the latter comprising mostly of payments to doctors, account for 60 per cent of all health spending.

Novak told reporters that holding the line on health spending since 2012 was a critical part of the province’s plan (recently abandoned) of balancing the books by 2017-18, just in time for the June 7 election.

“(But) since 2012, health sector spending has not kept pace with the funding pressure from inflation and Ontario’s growing and aging population,” he said.

The province slowed growth in spending through a combination of measures, including a four-year freeze in base-operating funding to hospitals, an increase in hospital efficiency and a clampdown on wage growth, he noted.

New Democrat MPP and finance critic John Vanthof charged that the FAO analysis confirms that Liberals’ cuts to health care are hurting patients:

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“Today the FAO made it clear that Liberal cuts and underfunding has been starving hospitals of vital resources, increasing pressures on staff and ultimately hurting families who count on our health care system to be there for them when they need it.”

Anthony Dale, president of the Ontario Hospital Association, indicated that the sector has exhausted all efforts to find more efficiencies. He noted that despite four years of no increases to base funding, average lengths of stay have declined and quality of care has been enhanced. Funding for hospitals in Ontario, on a per-capita-basis, is now the lowest in the country, he added.

“With significant efficiency gains already made, many organizations are now deeply concerned about the consequences of further cost cutting on access to patient care. Costs for the hospital sector are expected to increase 4.55 per cent next fiscal year as a result of inflation, labour increases, new regulatory requirements, and higher patient demand for services,” Dale said.