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Complementary and Alternative Medicine 2017

Conventional medicine’s ability to deal with and treat pain and disease continues to progress thanks to changes in medical practice and the introduction of new medical and pharmaceutical technologies. At the same time, the public’s knowledge about what health care can do has also grown considerably, in part because of continually expanding access to information and knowledge via the internet. These significant changes in the health care world led to the question of whether or not, and to what degree, Canadians’ use of, and public attitudes towards, complementary and alternative medicine (such as chiropractic, naturopathic, and herbal therapies) have changed over the past two decades.

To answer this question, the Fraser Institute commissioned Compas to conduct a Canadian national survey to determine the prevalence, costs, and patterns of complementary and alternative medicine (CAM) use in 2016. This is the third in a series of surveys on the use of and public attitudes towards CAM published by the Fraser Institute. The first ever comprehensive study was undertaken in 1997, with a follow-up survey completed in 2006 (Ramsay et al, 1999; Esmail, 2007). This survey series is the only comprehensive study of the use and public attitudes towards CAM by Canadians.

Canadians’ self-reported health has seen little change over the last decade: Sixty percent or more of respondents reported their health to be very good or excellent in 1997, 2006, and 2016, while 12 percent of respondents in 2016 and 11 percent in 2006 and 1997 reported their health to be fair or poor. The most common health conditions reported in the 12 months prior to all three surveys were back or neck problems (34% in 2016, 28% in 2006, 30% in 1997), allergies (27% in 2016, 29% in 2006 and 1997), and arthritis or rheumatism (23% in 2016, 21% in 2006, 20% in 1997).

More than three-quarters of Canadians (79%) had used at least one complementary or alternative therapy sometime in their lives in 2016. This compares to 74% in 2006 and 73% in 1997. Among the provinces in 2016, British Columbians were most likely to have used an alternative therapy during their lifetime (89%), followed by Albertans (84%) and Ontarians (81%). Conversely, those in Quebec (69%) were least likely to have done so. Similar patterns were observed in the past two surveys, though respondents from the Atlantic provinces were more likely to have reported using at least one complementary and alternative medicine or therapy sometime in their lives in 2016 (77%) than in either 2006 (63%) or 1997 (69%).

In 2016, massage was the most common type of therapy that Canadians used over their lifetime with 44 percent having tried it, followed by chiropractic care (42%), yoga (27%), relaxation techniques (25%), and acupuncture (22%). Nationally, the most rapidly expanding therapies over the past two decades or so (rate of change between 1997 and 2016) were massage, yoga, acupuncture, chiropractic care, osteopathy, and naturopathy. High dose/mega vitamins, herbal therapies, and folk remedies appear to be in declining use over that same time period.

More than half (56%) of Canadians used at least one CAM therapy in the year prior to the 2016 survey, compared to 54% in 2006 and 50% in 1997. In the 12 months prior to the 2016 survey, the most commonly used complementary and alternative medicines and therapies were massage (24%), relaxation techniques (19%), chiropractic care and yoga (16%), and prayer (15%).

The most likely users of complementary and alternative therapies over the past 12 months in 2016 were from the 35- to 44-year-old age group (61%). The use of complementary and alternative medicines and treatments diminished with age, and generally rose with both income and education. These trends are similar to those observed in 2006 and 1997, though there was no income trend found in 1997.

The majority of people choosing to use complementary and alternative therapies in the 12 months preceding the 2016 survey continued to do so for “wellness”—to prevent future illness from occurring or to maintain health and vitality. However, there has been a notable shift in the use of complementary and alternative therapies for wellness since the earlier iterations of the survey, with the overwhelming majority of therapies used less for wellness in 2016 than in either 2006 or 1997.

Canadians spent an estimated $8.8 billion on CAM in the latter half of 2015 and first half of 2016. This is an increase from the estimated $8.0 billion spent in 2005/06 and the estimated $6.3 billion spent in 1996/97 (in 2016 dollars, adjusted using Statistics Canada’s Consumer Price Index). Of the $8.8 billion spent in 2016, more than $6.5 billion was spent on providers of CAM, while another $2.3 billion was spent on herbs, vitamins, special diet programs, books, classes, and equipment. While these amounts are not insubstantial, the majority of Canadians believe that alternative therapies should be paid for privately and not by provincial health plans.

The survey results reveal regional variations in attitudes towards health care, which provides further support for devolution of health policy, both conventional and alternative, to provincial governments. For example, British Columbians, Albertans, and those in Saskatchewan and Manitoba were more likely to perceive value in CAM than residents of Quebec and the Atlantic provinces. Perceptions about the value of conventional medicine in treating health problems, support for various financing approaches for expansions in coverage, and support for private financing of CAM also varied across the provinces.

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Canada's Air Quality Since 1970: An Environmental Success Story

Canadians have long been concerned about the state of our air quality and the belief that air pollution is a major problem seems to be widespread. This publication examines the evolution of air quality in Canada from the 1970s onward and looks at how the current state of air quality compares to the stringent standards established by Canadian government policy. The conclusion is that air quality in Canada has improved substantially and that this significant change over the past four decades occurred at the same time there was considerable growth in Canada’s population, economic activity, energy use, and consumption of motor fuel.

Using data from Environment Canada on emissions and ambient concentrations, the study provides accurate and up-to-date information on the status of five major air pollutants in Canada: ground level ozone, fine particulate matter, sulphur dioxide, nitrogen dioxide, and carbon monoxide. Comparing trends for the five air pollutants on three levels—national, city, and monitoring station—against existing national and international air-quality standards shows that air quality is improving for the most part and is now at levels generally deemed safe.

Ground-level ozone
Concentrations of ground-level ozone, a key component of smog, have generally decreased in Canada since 2000. In 2015, the national concentration of ground-level ozone was 27% lower than in 1979 and ozone concentrations have been consistently below the new stringent air-quality standard since 2005. Major Canadian cities have lower ozone concentrations than they had during the late 1970s. In the same period, over 70% of monitoring stations throughout Canada reported ozone concentrations that were above the air-quality standard; that number has fallen to 16% during the most recent interval.

Fine particulate matter
Concentrations of fine particulate matter in Canada have only been measured since 2000 and national ambient levels have consistently remained below the new air-quality standards.

Sulphur dioxide
In the last four decades, concentrations of sulphur dioxide have fallen dramatically across Canada and have met the strictest annual air-quality standard since 1999. In 2015, ambient levels of sulphur dioxide in Canada were 92.3% lower than in 1974. Major Canadian cities also significantly reduced their ambient levels of sulphur dioxide during the same period. In the mid-to-late 1970s, over 60% of monitoring stations across Canada recorded concentrations out of compliance with the annual air-quality standard, but today only 3% of stations record non-conforming levels.

Nitrogen dioxide
Concentrations of nitrogen dioxide have also been decreasing for decades in Canada. Ambient concentrations of nitrogen dioxide in Canada decreased 74.4% from 1974 to 2015 and ambient levels have been consistently below the strictest air-quality standard since 1985. The decrease in ambient levels was also apparent in all major Canadian cities. Whereas in the mid 1970s, 54% of stations across Canada reported readings out of compliance with the annual air-quality standard for nitrogen dioxide, in 2015 the percentage was zero. All monitoring stations throughout Canada have met the strictest annual air-quality standard for nitrogen dioxide since 2011.

Carbon monoxide
There has also been a substantial reduction in concentrations of carbon monoxide in Canada during the last four decades. Ambient levels fell 90.4% in Canada from 1974 to 2015 and have conformed to the strictest air-quality standard since 1985. Levels of carbon monoxide in major cities have also fallen dramatically over the past four decades. In mid-1970s, 84% of stations had readings for carbon monoxide exceeding the air-quality standards but, since 1999, all stations across Canada—with the exception of one in New Brunswick in 2011—recorded values conforming to the air-quality standard.

Socioeconomic trends
Between 1970 and 2015, real gross domestic product increased by 242% and the Canadian population grew by 68%. From 1980 to 2015, consumption of motor fuel rose by 26% and from 1995 to 2015 energy use increased 21%. At the same time emissions and ambient levels of major air pollutants dropped significantly, indicating the extent to which air pollution has been decoupled from energy use and economic growth in Canada. For this reason, discussions about the need for new policies to tighten emission policies even further should begin with the recognition that air pollution has already substantially declined in Canada and is largely in compliance with some of the strictest standards in the world.

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Understanding Wealth Inequality in Canada

This paper addresses two questions. First, is wealth inequality in Canada increasing? Second, what is driving the wealth inequality that we observe? The empirical evidence presented in this study strongly suggests that, at least in recent decades, wealth inequality in Canada has not increased. As well, the evidence presented here appears to support the view that the Life-Cycle Hypothesis, which tells us that, for most people. wealth accumulation is a steady, lifelong process, is the dominant explanation for observed differences in wealth.

Specifically, we note that there has been a 17% decline in the Gini Coefficient (the most popular indicator of inequality) on Canadian net worth between 1970 and 2012. As well, both top decile share and top quintile share have declined over the same period, although by a smaller percentage. The fact that wealth inequality has not increased has led many in the social justice community to focus attention, rather, on the degree of wealth inequality. The fact that the top 20% of Canadians own about 67% of the wealth and the bottom 20% own none has been the subject of much attention and outrage.

Students of economics have long appreciated that, for most people, wealth has a predictable age pattern. The Life-Cycle Hypothesis developed in the 1950s by Modigliani and Brumberg shows that income, consumption, saving, and wealth accumulation change with age because of the natural rhythms of education, work, marriage and family formation, pension saving, and retirement. This means that, even if everyone was identical, there would be substantial wealth inequality because, at any point in time, we have people at different points in their life cycle. Of course, everyone is not identical and there are differences in wealth that are not due to age. The critical point here is that life-cycle effects, alone, are capable of explaining most of the observed wealth inequality in Canada.

Reasons for differences in wealth that are not related to the life-cycle effect would include skill differentials (and all of the personal characteristics that lie behind those differences); preferences and choices; luck (which would include inheritances); and institutional and policy considerations. The latter point refers to any institution, regulation, or policy that constrains (in an important way) the ability or incentive for upward mobility.

It is an empirical question as to how much of wealth inequality is explained by the life-cycle effect and how much by the other factors. Evidence from US studies about the relative importance of the life-cycle effect vary considerably—from the 30%-to-50% range to the 80% range. This paper uses a variant of the Paglin’s approach (from 1975) and shows that the life-cycle effect in Canada likely accounts for between 80% and 87% of wealth inequality in 2012. This result is broadly consistent with many of the US studies in this area.

There is much heat and fury about wealth inequality. This publication addresses the popular perception and finds that much of the concern is misplaced. The fact that the bottom 20% have no wealth is not surprising and is unworthy of the passion devoted to it. Many of those in the bottom wealth quintile are young and have not yet had an opportunity to accumulate any wealth. Many people with no wealth in their twenties will be in the top wealth quintile (or even top decile) by the time they retire. The paper suggests that attention could be appropriately diverted towards the issues of poverty (real deprivation) and barriers (including governmental) to upward mobility.

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History and Development of Canada's Personal Income Tax

In recognition of the 100th anniversary of Canada’s personal income tax (PIT), the Fraser Institute asked a group of accomplished scholars to analyze and assess the emergence, development, and current state of Canada’s federal personal income tax. The following provides a short synopsis of the essays.

The first four essays that make up the volume start at the tax’s beginning. As William Watson argues, to historians the summer of 1917 is best known not for the income tax but for the conscription debate. For the first almost three full years of war, Robert Borden’s government had avoided introducing conscription but in 1917 finally felt obliged to enact it. In timing that was not coincidental, it announced the “War Income Tax” literally days later. With young Canadians heading to war, most people felt that richer Canadians should be forced to contribute more to the war effort. Contrary to popular mythology, the tax was not explicitly temporary. Rather, finance minister Sir Thomas White recommended only that it be reconsidered after the war.

Over the following 100 years, as a second essay by Watson describes, a handful of key federal budgets produced the PIT we know today.  Tax withholding was introduced in 1943. In 1971, J. Edgar Benson taxed capital gains for the first time, while two years later John Turner brought in full indexing of tax bracket thresholds. Base-broadening exercises (broadening the tax base to lower tax rates) failed in 1981 but succeeded in 1987.

Livio Di Matteo’s essay contrasts today’s personal income tax with where the tax started. One great difference between now and then is how little revenue the income tax originally raised. As a share of total federal revenue, personal income taxes went from just 2.6 percent in 1918 to an expected 51 percent in 2017.

The number of Canadians who pay personal income taxes has also risen sharply. As late as 1938, only 2.3 percent of the population filed income taxes. Now almost 75 per cent of Canadians do.

A main argument against the PIT, even with the relatively low rates and high thresholds of 1917, was that it would hurt Canada’s competitiveness. As one of the essays points out, Canada now has one of the highest top PIT rates and it kicks in at comparatively low levels of income for high-skilled workers, professionals, and entrepreneurs. Put simply, the worries of 1917 have been borne out: personal income taxes are the tax area where, globally, Canada is least competitive. This is made all the worse when one considers that Canada now taxes capital gains, which, as Herbert Grubel and Jason Clemens point out, for the first 105 years of Confederation Ottawa did not do.

Several other essays also look at the current state of the PIT. François Vaillancourt and Charles Lammam conclude that it now costs roughly $500 per household to comply with filing personal income taxes, a sum that is a much greater share of a low-income family’s budget than a higher-income family’s. Mainly, the income tax system is more costly because it is more complex. For example, an Income Tax Act that was just six pages in 1917 is now 1,412 pages. The tax form, just 23 lines long in 1917, had by 2015 grown to 328 lines. Vaillancourt and Lammam conclude that tax reform based on simplifying the tax code is long overdue.

As Bev Dahlby’s essay points out, there are also economic costs to worry about. Efficiency costs occur when beneficial activity would have been undertaken, but tax rates and rules prevent or discourage it. Dahlby’s research shows that in every province, these indirect costs now exceed the direct cost of taxation, which is simply the money we transfer to the taxing government. His provincial-level estimates are striking. The cost of raising $1 of PIT revenue exceeds $2 in all provinces, while in Quebec it exceeds $3, in Newfoundland and Labrador $4, and in Ontario almost $7. Given these costs, projects financed with PIT revenues would have to exhibit benefits of more than $7 for every $1 spent on them in order to be justifiable. The list of such projects can’t be very long.

The final three essays focus on how to get a smarter tax system embodying better incentives for work, savings, investment, and entrepreneurship. The recommendations include reducing or eliminating many of the tax credits and other privileges now embedded in the tax code in order to allow for lower, efficiency-enhancing tax rates that raise the same overall revenue. In his essay, Jack Mintz recommends replacing the PIT with a PCT, a personal consumption tax.

After 100 years of Canada’s federal personal income tax, it’s clear we need broad reform to counter many of the concerns—including complexity and lack of competitiveness—that were voiced in the original 1917 debates on the new tax.

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Report Card on Alberta’s Elementary Schools 2017

The Report Card on Alberta’s Elementary Schools 2017 reports a variety of relevant, objective indicators of school performance. These indicators are used to calculate an overall rating for each school. On the basis of this rating, the schools are ranked. The Report Card brings all of this information together in one easily accessible public document so that anyone can analyze and compare the performance of individual schools. By doing so, the Report Card assists parents when they choose a school for their children and encourages and assists all those seeking to improve their school.

In Alberta, many parents enjoy considerable choice regarding the school in which they will enroll their children. Where choice is available, the Report Card provides a valuable decision-making tool. Because it makes comparisons easy, the Report Card alerts parents to nearby schools that appear to have more effective academic programs. Further, parents can determine whether schools of interest are improving over time. By first studying the Report Card, parents will be better prepared to ask relevant questions when they interview the principal and teachers at the schools they are considering.

Of course, the choice of a school should not be made solely on the basis of a single source of information. A tour of each school of interest and an interview with the principal can be useful. Parents who already have a child enrolled at the school provide another point of view.

The Report Card provides a detailed picture of each school’s academic outcomes that is not easily available elsewhere. Naturally, a sound academic program should be complemented by effective programs in areas of school activity not measured by the Report Card.

Certainly, the act of publicly rating and ranking schools attracts attention. Schools that perform well or show consistent improvement are applauded. The results of poorly performing schools generate concern, as do those of schools whose performance is deteriorating. This inevitable attention provides an incentive for all those connected with a school to focus on student results.

However, the Report Card offers more than incentive: it includes a variety of indicators, each of which reports results for an aspect of school performance that might be improved. School administrators who are dedicated to improvement accept the Report Card as another source of opportunities for positive change.

Knowing that a school’s results require improvement is the first step. However, to improve a school, one must believe that improvement is achievable. This Report Card provides evidence about what can be accomplished. It demonstrates clearly that, even when we take into account factors such as the students’ family and personal characteristics, some schools do better than others. This finding confirms the results of research carried out in other countries. It will come as no great surprise to experienced parents and educators that the data consistently suggest that what goes on in the schools makes a difference to academic results and that some schools make more of a difference than others.

Many elementary-school authorities in Alberta provide students and their parents with report cards that include both the student’s mark and the median mark for each subject in which the student is enrolled. The report cards also show any marks awarded to the student earlier in the year. Comparative and historical data like these enable students and parents to see a clearer picture of an individual student’s progress. By comparing a school’s results with those of neighbouring schools or of schools with similar school and student characteristics, we can identify more successful schools and learn from them. By comparing a school’s latest results with those of earlier years, we can see if the school is improving. Reference to overall provincial results places an individual school’s level of achievement in a broader context.

There is great benefit in identifying schools that are particularly effective. By studying the techniques used in schools where students are successful, less effective schools may find ways to improve.

Comparisons are at the heart of improvement: making comparisons among schools is made simpler and more meaningful by the Report Card’s indicators, ratings, and rankings.

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Hold the Celebration

Summary

  • Ontario’s public finances have deteriorated markedly in recent years. Net debt (gross debt minus financial assets) has approximately doubled since 2007; it is estimated that it will reach $318 billion this year (2016/17).
  • After nine consecutive multi-billion dollar deficits, the provincial government forecasts it will balance its operating budget next year (2017/18). Even if the government meets that goal, it would be wildly premature to take this as evidence that Ontario’s fiscal problems are essentially solved or as justification for a more relaxed approach to public spending.
  • There are three reasons Ontario should “hold the celebration.” First, balancing the budget in 2017/18 won’t undo the damage caused by the long string of budget deficits in preceding years. Those accumulated deficits (which now form part of the province’s net debt) will not simply disappear when the budget finally is balanced.
  • Second, despite a balanced operating budget, the province actually plans to continue adding significant additional debt in the years ahead. The government forecasts it will add approximately $9.1 billion to the provincial debt per year, on average, through to the end of 2018/19, and its Financial Accountability Office (FAO) projects it will continue to accumulate new debt at a similar rate in subsequent years.
  • Finally, the government’s own forecasts show that it will make virtually no progress in reducing the province’s debt-to-GDP ratio in the years ahead, as that ratio is expected to hover within a percentage point of its current historically high rate of approximately 40% of GDP.
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Comparing the Family Income of Students in BC

Summary

  • On average, families with children in independent schools earned $88,367 in income (after taxes) compared to $77,396, on average, for families with children in public schools, which represents a gap of 14.2 percent.
  • If the families with children attending elite independent schools are removed, the average income (after tax) for the remaining families with children attending independent schools falls to $78,894, which is only 1.9 percent above the average income for families with children in public schools.
  • Only 8.2 percent of independent schools in British Columbia were categorized as elite as of 2016.
  • Families with children in elite independent schools maintained an average income (after tax) of $119,242, which is 54.1 percent higher than the average income for families with children in public schools.
  • Increasing the coverage ratio to 80 percent or decreasing it to 50 percent does not materially change the results. Families with children attending non-elite independent schools maintain roughly the same level of total after-tax income as families with children attending public schools.
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Quebec’s Daycare Program: A Flawed Policy Model

Main Conclusions

  • In 1997, Quebec instituted a system of subsidized daycare, providing daycare spots at a daily rate of $5 per day regardless of parental income. Despite some modest reforms, this “universal” daycare program retains its original structure.
  • Quebec’s system is expensive. The government spends over $9,000 per child served, for a total cost of approximately $2.6 billion in 2014/15.
  • Nevertheless, Quebec’s daycare system has been held up by some as a model for other provinces: advocates argue increased maternal labour-force participation generates tax revenue that offsets program costs and that the program produces beneficial child development outcomes.
  • These claims should be treated skeptically. The resulting tax revenues from increased maternal labour-force participation likely do not offset the full cost of Quebec’s program. What’s more, the effects upon labour-force participation in Quebec cannot easily be generalized to the rest of Canada and daycare based on Quebec’s model would likely have significant fiscal costs if adopted elsewhere.
  • Evidence for long-lasting child development gains from subsidized daycare is mixed. Troublingly, studies from Quebec show the program has contributed to significantly worse health and social development outcomes.
  • Although the program is often described as “universal”, Quebec has not solved the problem of access and waiting times despite very high levels of government spending. Lengthy wait times remain in many areas, and children from higher income families are more likely to obtain a place in daycare.
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Custom Election Codes for First Nations

Many contemporary First Nation leaders, and even legal scholars, including the respected authors of a 2010 Senate standing committee report on Aboriginal peoples, have heralded custom election systems on reserves as the foundation for better band governance. Custom systems allow First Nation communities to design and adopt their own election code, albeit with some federal requirements that must be met before final approval.

Many of these Indigenous observers believe band elections held under the Indian Act system are inherently “colonialist” and even oppressive of Indigenous peoples’ legitimate aspirations. They argue that modern band leaders increasingly view these structures as illegitimate. It is the contention of this study that a thoughtful evaluation of how custom election systems really work shows that there is more than initially meets the eye.

This paper calls for sober second thought on this subject. Such considered reflection is especially critical in 2017 because currently, most First Nations in Canada hold band elections under custom code systems. Indian Act systems are now the minority across the country, although some regions still hold to them. Indigenous leaders continue to promote custom election systems as a better alternative to the Indian Act system.

The subject is important because there is a demonstrable connection between governance and improved socio-economic indicators. This paper argues that the end goal of Aboriginal self-government is good governance that elevates community well-being. Drawing on the work of Fraser Institute and other specialists in Indigenous governance, this paper makes the case for comparing custom election and Indian Act systems, evaluating how they favourably rebalance governance, especially in terms of greater democracy and accountability. Good governance helps unleash the economic potential of Indigenous communities, which is something First Nations should consider when they design electoral and governance structures for their impoverished communities.

This paper examines both the favourable and unfavourable aspects of custom election systems for First Nations, especially for modern Indigenous governance. While allowing Indigenous communities to escape the paternalistic aspects of the Indian Act, the study found that without federal oversight, custom election codes permit various forms of discrimination, such as that based on reserve residency. A wide range of scholars and parliamentarians had assumed that custom election systems could deal with the inherent weaknesses of the Indian Act system. To some extent, they can and have, but they have also introduced problems of their own that are not widely understood or mentioned.

The paper also mentions documented cases where once Indigenous Affairs Canada has signed off on a custom code, on-reserve governments act to subvert institutions – such as representative custom councils – that are meant to check excessive chief and councilor power or ensure financial disclosure and accountability to community members. In these cases, it could be argued that self-government has been used inappropriately as a cover for abuse of power. The paper also finds that without any intervention from Indigenous and Northern Affairs Canada (which happens for bands still under the Indian Act), custom bands find themselves thrown into divisive and costly court battles. The study discusses new data from the well-regarded Community Well-Being Index (CWB), which shows that bands adopting custom codes have no better community well-being than those under the Indian Act. Therefore, governments need to better understand these systems before they promote them in a sweeping and universal manner. While custom codes hold the promise of creating accountable and transparent governance structures, this study cautions communities planning to adopt them to think through both their pros and cons.

In the end, this study offers some practical next steps, such as the widespread adoption of band constitutions to prevent residency discrimination and other abuses, and to promote independent dispute resolution. Bands must also share best custom code practices with each other. Lastly, the federal government must help ensure that any movement towards custom election systems definitively improves Indigenous well-being.

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Sustainability of Health Care Spending in Canada 2017

Health care is the single largest budget item for every province in Canada, ranging from 34.3 percent of total program spending in Quebec to 43.2 percent in Ontario in 2016. Any changes in the amount spent on health care can have a significant impact on a government’s fiscal balance (deficits or surpluses), the resources available for other programs such as education and social services, and/or tax competitiveness.

It is therefore vital that we routinely assess historical, current, and expected trends in health care spending in order to determine if such spending is sustainable.

While a number of indicators can help determine the sustainability of changes to health care spending, the most common and informative of these indicators is the share of program spending represented by health care and the ratio of health care spending relative to the size of the economy (GDP). An increase in the former may result in the crowding-out of other spending while an increase in the latter may require a change in the current tax system or deficits.

An examination of these two indicators of health care spending, that is health care spending as a share of program spending and health care spending as a share of the economy, shows clearly that the last 15 years (ie., between 2001 to 2016) saw provincial governments increase health care spending at an unsustainable pace. Indeed, during this period, health care spending grew by 116.4 percent, outpacing growth in other program spending (94.6 percent) and GDP (77.4 percent). It is therefore unsurprising that during the same period, the share of program spending represented by health care for the provinces in total grew from 37.6 percent to 40.1 percent. Further, while provincial health care spending (in total) represented only about 6.0 percent of Canada’s GDP in 2001, it had grown to represent 7.3 percent by 2016. However, growth in spending has not followed a consistent trend over this 15-year period. Notably, the average annual growth in health spending (6.7 percent) during the first 10 years between 2001-2011 was much higher than the average annual growth during the past 5 years (2.6 percent) between 2011-2016.

The pressing question today, however, is what can we reasonably expect to occur in the near future in the absence of any significant shift in government policy?

In order to answer this question, this paper presents the results of two scenarios based on a model for projecting health care spending in the future based on demographic factors (population growth and aging), inflation (general and health-specific inflation), and other factors (which may include factors related to government policy, income elasticity, developments in technology, etc.).

The first scenario (long-term trend model) is based on reasonable expectations of general inflation and demographic trends in the future, as well as assumptions regarding health-specific inflation, and other factors based on trends observed between 2001 and 2016. Under this scenario, health care spending is projected to grow at about 5.3 percent per annum on average between 2016 and 2031. As a result, health care spending is expected to consume a slightly larger portion of total program spending—growing from 40.1 percent in 2016 to 42.6 percent in 2031. The range of results for specific provinces is a low of 34.2 percent in Quebec to a high of 47.2 percent in British Columbia in 2031. As well, health spending in total is expected to grow from 7.3 percent of the economy in 2016 to 9.3 percent in 2031. Health care spending in four provinces (British Columbia, Prince Edward Island, Ontario and Nova Scotia) is projected to consume over 45 percent of total program spending—suggesting increases in spending along these lines may be unsustainable and carry some risk of crowding out other programs or requiring fiscal adjustments.

In the second scenario (short-term trend model), the assumptions regarding health-specific inflation and other factors are altered to reflect trends only between the shorter and more recent period between 2011 and 2016. Under this scenario, health care spending is projected to grow at about 2.9 percent per annum on average between 2016 and 2021. As a result, it is expected that health care spending will continue to represent about the same portion of total program spending—growing from 40.1 percent in 2016 to 40.5 percent in 2021. Relative to the size of the economy, health spending is again expected to remain roughly constant—decreasing marginally from 7.3 percent of the economy in 2016 to 7.0 percent of the economy in 2021. Under this scenario, there is less risk of crowding out other programs and requiring fiscal adjustments.

After years of increasing health care spending at an unsustainable pace, it seems as through provincial governments have started to reach their limits over the past 5 years—understanding that a continuation of such increases would result in either reductions in other spending, or higher taxation, higher deficits and debt, or some combination of these three.

Indeed, given expected inflationary and demographic pressures, if governments increase health care spending in the future in line with trends observed over the last 5 (rather than 15) years, the present ratio of health care spending to program spending and GDP may be preserved (at least in the near future). However, the continual presence of long wait times and low ratios of human and technological medical resources despite historically high levels of spending raise new questions about whether the public health care system will be able to deliver adequate services to patients without fundamentally altering its structure.

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