Health-care spending increases point to unsustainable future

Provincial governments need to start re-examining how their health-care dollars are spent or implementing meaningful health-care reform now

By Bacchus Barua
and Milagros Palacios
The Fraser Institute

VANCOUVER, B.C. June 2, 2016/ Troy Media/ – Health care is the single largest budget item for every provincial government in Canada. Increases in spending on health care can therefore have a significant impact on resources available for other government programs (such as education and social services), the tax system, and the government’s fiscal balance and debt.

Based on the historical trends observed over the last 15 years or so, in addition to expectations regarding inflation and a growing (and ageing) population, health-care spending is projected to consume an increasing portion of both program spending and the economy.

health-care
Bacchus Barua

A new [popup url=”https://www.fraserinstitute.org/studies/sustainability-of-health-care-spending-in-canada” height=”1000″ width=”1000″ scrollbars=”1″]study[/popup] by the Fraser Institute estimates that, across Canada, health-care spending by provincial governments will grow from consuming 40.6 per cent of total program spending (in 2015) to 47.6 per cent (in 2030). By comparison, health care represented 34.4 per cent of program spending in 1998.

While every province is expected to see health-care spending consume a larger portion of their budget in the future, five provinces (P.E.I., Nova Scotia, New Brunswick, Ontario and British Columbia) will see health spending grow close to or exceed 50 per cent of total program spending. Only Quebec and Saskatchewan are expected to keep health-care spending under 40 per cent of total program spending.

health-care
Milagros Palacios

Notably, health-care spending by Canada’s provincial governments (in total) is also projected to consume a larger portion of country’s economy – growing from 7.3 per cent of GDP in 2015 to 10.7 per cent in 2030. In particular, the Atlantic Provinces and Manitoba may see health-care spending consume more than 15 per cent of their provincial economies in the future.

Given the expected increases in the ratio of health-care spending to both total program spending and GDP, it’s clear we are facing a fiscally unsustainable future. If governments continue along this path, there will have to be either reductions in spending on other programs, or higher taxation, higher deficits and debt, or some combination of these three.

Of course, the examples of other countries with universal health-care systems prove that increased spending is not a necessary prerequisite for a better health-care system. In fact, [popup url=”https://www.fraserinstitute.org/studies/how-good-is-canadian-health-care-2008-report” height=”1000″ width=”1000″ scrollbars=”1″]many countries[/popup] spend similarly (or less) than Canada does (including public and private spending), and yet have more medical resources, [popup url=”http://www.commonwealthfund.org/~/media/files/publications/fund-report/2016/jan/1857_mossialos_intl_profiles_2015_v7.pdf” height=”1000″ width=”1000″ scrollbars=”1″]shorter wait times[/popup], and similar (or better) outcomes. However, unlike Canada, these countries generally incentivize hospitals based on activity, require patients to [popup url=”https://www.fraserinstitute.org/studies/select-cost-sharing-in-universal-health-care-countries” height=”1000″ width=”1000″ scrollbars=”1″]share the costs of treatment[/popup], and [popup url=”https://www.fraserinstitute.org/studies/for-profit-hospitals-and-insurers-in-universal-health-care-countries” height=”1000″ width=”1000″ scrollbars=”1″]involve the private sector[/popup] (either as a partner, or an alternative) – all while ensuring the promise of universally accessible care.

While Canadians and their elected policymakers will have to ultimately decide which of these policies to experiment with and implement, it’s clear that the current model will become increasingly unsustainable from an economic standpoint. Provincial governments need to either re-examine how their health-care dollars are spent and implement meaningful health-care reform or face the consequences of fewer resources for other programs, an increased tax burden, or larger debt.

Bacchus Barua and Milagros Palacios are analysts at the Fraser Institute.

Bacchus and Milagros are Troy Media [popup url=”http://marketplace.troymedia.com/our-contributors/” height=”1000″ width=”1000″ scrollbars=”1″]contributors[/popup]. [popup url=”http://www.troymedia.com/become-a-troy-media-contributor/” height=”600″ width=”600″ scrollbars=”1″] Why aren’t you?[/popup]

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