Hard choices ahead—growth in health-care spending means something’s gotta give
As the single largest budget item for every province in Canada, it’s important to examine changes in health-care spending by provincial governments as they will have a considerable impact on other social programs, the tax structure, and/or deficits and debt.
A recent study examines historical and projected health care spending trends by Canada’s provincial governments. It finds that between 1998 and 2015 on average, health-care spending increased by 165.7 per cent—outpacing population growth, inflation, spending on other programs, and growth in the economy (GDP). While health care consumed 34.4 per cent of provincial budgets in 1998, it grew to consume 40.6 per cent in 2015. Measured a different way, health care represented about 5.8 per cent of provincial economies GDP in 1998, but 7.3 per cent in 2015.
These trends, along with expectations regarding inflation and population changes (growth and aging) in the future suggest that by 2030 health care may consume up to 47.6 per cent of provincial budgets. Further, based on expectations of future economic growth, health care will grow to represent up to 10.7 per cent of provincial economies in 2030.
These projections suggest that provincial governments (and the individuals they represent) will likely face a difficult fiscal choice about health-care spending in the future. Either there will be fewer resources for other programs, higher taxation, higher deficits and debt, or some combination of these three.
Of course, these projections vary by province. For example, as we can see in the chart below, British Columbia, Ontario, New Brunswick, Nova Scotia and Prince Edward Island will see health-care spending consume close to (or exceed) 50 per cent of their budgets. Meanwhile, Quebec and Saskatchewan are projected to keep spending under 40 per cent of theirs.
However, as seen in the second chart below, health-care spending is projected to represent a significantly larger portion of every provincial economy (as measured by GDP) by 2030. Given the current economic situation, it’s likely that these projections will look much worse once updated data is available. This is an important secondary measure to examine (in addition to the share of program spending discussed above) because it helps inform us about the ability of the provincial economy to generate enough resources to fund expected increases in spending.
Unfortunately, international data suggest that this high level of spending has not yielded high value in return. Canada generally has fewer physicians, beds, and diagnostic imaging technology than the average OECD country. It also has some of the longest wait times for treatment in the developed world.
Provincial governments should take this opportunity to re-examine how health-care dollars are spent and consider whether it’s time to introduce meaningful health policy reforms in line with other more successful universal health-care systems. Some of these may include (but are not limited to) the inclusion of the private sector as a partner or alternative and requiring patients to share in the costs of treatment (with annual caps, and exemptions for vulnerable groups).
However, if we don’t make significant changes to our health-care system while constraining spending increases over the long-term, we will face either fewer resources for other programs, increased taxation, debt and deficits, or some combination of the three. Either way hard choices are required.
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