A Win for Healthcare Reform in Nova Scotia

Economist Paul Krugman once wrote that “the basic picture one should have of the government is of a huge insurance company with an army.” Increasingly, what defines the government is more or less summed up as “public health-care provider,” which, while it may exclude the military, comes with its own well-regulated militia in the form of powerful nursing unions.

In an aging Nova Scotia, the militant tactics of nursing unions have ranged from illegal strikes to coordinated mass resignations. Indeed, Nova Scotia recently had to enact essential service legislation that pertains to the healthcare industry, making it the final province to do so, after three major labour disruptions in only seven months. With fifty bargaining units and nine District Health Authorities (DHAs), the politics of healthcare reform is an abyss for premier after premier to throw scarce political capital into, never to be seen again. Yet, it is hardly surprising that successive governments keep returning to healthcare when it accounts for more than half of the provincial budget and 13.2 per cent of Nova Scotia’s GDP–the highest rate among the provinces.

The latest attempt to simplify the system involves the majority government’s initiative to collapse the DHAs down to 2 and the 50 bargaining units down to 4 major worker categories. This development will, in turn, require Nova Scotia’s four unions representing the healthcare sector to each assume a worker category based on their own membership rates. For instance, while registered nurses (RN) are currently spread across all four unions, they will likely end up pooling in the Nova Scotia Nurses Union (NSNU) since they have the highest number of existing RNs for members.

These developments have clearly put the largest union in the province, the Nova Scotia General Employees Union (NSGEU), in panic mode. Under the new system, it may end up solely representing clerical workers and, as a result, take a big hit in its higher-wage membership. According to Metro writer Stephen Kimber, it’s a “divide and conquer” strategy that will “decimate” the NSGEU’s revenues. In a last ditch effort earlier in the year, the NSGEU implored the other unions to set rivalries aside and form a Bargaining Association (BA). This shift would have represented a major swing in political power towards the unions. Instead, the NSNU was wise enough to realize they had everything to gain by going with the government’s plan.

The new balance of power will hopefully provide a window for significant wage restraint among Nova Scotia’s healthcare workers. When the Health Association of Nova Scotia compared Nova Scotia with British Columbia in 2012, they found that Nova Scotia spends “substantially more in most categories with the exception of public health and capital.”  The report was quick to point out that “demographics, on their own, account for a relatively small proportion of growth in health spending … The main cost drivers in health-care are increased utilization of services (e.g. drugs, specialists), innovations in medical science and technology, and salaries paid to health-care providers,” which, in turn is mostly accounted for in differences in organizational structure and funding models.

There is, therefore, good reason to think that reforming bargaining units may help begin to rein-in both wage growth and strike frequency, a state of affairs sometimes referred to as “labour quiescence.” Before, the four unions competed aggressively against each other for members by demanding and advertising ever greater benefits. But, by segregating worker categories into separate unions, the benefit competition becomes undermined. Indeed, in formal economic models, when two or more unions are composed of members who complement each other, as opposed to substitute, wage restraint prevails and strike risk declines. For example, since clerical workers, LPNs, and RNs all complement each other, if any one group decided to strike it would harm the other two making their opposition more likely.

It is too early to tell whether the reorganization of DHAs and bargaining units will actually save money. Like rearranging deck chairs on the Titanic, it seems like the number of Health Districts gets tweaked every so often with little to show for it. However, more important than capturing near-term efficiencies is whether these changes will improve the chances of more substantial reforms to healthcare provision going forward.

Samuel Hammond is an AIMS on Campus Student Fellow who is pursuing a graduate degree in economics at Carleton University. The views expressed are the opinion of the author and not necessarily that of the Atlantic Institute for Market Studies

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