As provincial Finance Minister Dwight Duncan pointed out in his budget speech two weeks ago, spending on health care in Ontario is rising faster than every other category. Twenty years ago, health care accounted for 32 cents of every dollar spent on provincial government programs; today, it is 46 cents (after discounting some one-time items); in 12 years, it is projected to be 70 cents.

That is clearly unsustainable. It will either bankrupt the government or drive down spending on every other item, from schools to subways.

What to do about it? Health Minister Deb Matthews provided a broad outline of the government's plans in a speech yesterday. While short on specifics, the speech provided some interesting clues on where Matthews is headed.

First of all, she has wisely ruled out user fees or some other two-tier approach. "Whoever needs care will get care," Matthews declared.

As for containing costs, the government is relying on a mixture of carrots and sticks. Among the carrots is legislation linking the pay of health-care executives to the quality of care delivered. The sticks include bargaining down generic drug prices and the "professional allowances" for pharmacies. (More on this in a subsequent editorial.)

Matthews said the government also plans to create an "independent, expert advisory board to provide evidence-based recommendations on clinical practice guidelines." That sounds a lot like Britain's National Institute for Health and Clinical Excellence, the watchdog that issues guidelines on what medicines, treatments and procedures are appropriate for coverage. Its recommendations have saved the British National Health Service hundreds of millions of pounds, but not without some controversy.

Finally, Matthews referred to "patient-based" payments for hospitals, which now get block funding from the government. "The main goal is to move toward a model where hospitals are compensated for services they provide and not just receiving base-funding increases year over year," she said. That could lead to rationalization of services, with certain procedures offered only in hospitals that can deliver them most efficiently. Again, it is likely to be controversial if it means closing, say, emergency rooms or obstetrics wards in some hospitals.

It is not clear how fast and far the government will move down this path, especially if it encounters public resistance. Matthews said her intention is to begin implementing the plan "in the coming year." With an election looming next year, the government may miss that deadline. But at least it is starting to tackle the problem.