Alberta’s health-care spending is unsustainable

The provincial government has no option but to implement meaningful health-care policy reforms

Reading Time: 3 minutes

By Bacchus Barua
and Ben Eisen
The Fraser Institute

It’s no secret Alberta’s provincial government is in a fiscal hole. Alberta is expected to run a big budget deficit this year and rack up tens of billions of dollars in debt over the next few years. If the provincial government wants to get Alberta’s financial house in order, one crucial step is to rein in health-care costs.

Since 1998, health-care spending in Alberta has increased by 317.1 per cent – faster than in any other Canadian province – outpacing population growth, inflation, growth in government spending on other programs, and provincial economic growth. Subsequently, while health-care spending consumed 34.1 per cent of the province’s budget in 1998, it ended up consuming 42 per cent of total program spending in 2015.

Bacchus Barua
Bacchus Barua

Given this trend, and expectations regarding inflation and a growing and aging population, a new study estimates that health-care spending could consume 47 per cent of the province’s budget by 2030.

Further, based on forecasts available last year, health-care spending as a share of provincial GDP (the value of all goods and services) is projected to grow from 5.9 per cent in 2015 to 10.4 per cent by 2030. Given the current state of the economy, this estimate may actually look a lot worse once updated figures are available.

These trends raise important questions about the sustainability of Alberta’s current policies.

Rising health-care costs will make it harder for the provincial government to balance future budgets and find money for other priorities such as education and infrastructure. If the provincial government wants to get health-care costs on a more sustainable trajectory, the need for policy reform is clear.

Fortunately, we’re not flying blind when it comes to developing policy reforms that can reduce costs while improving or maintaining service quality. Other countries with successful universal health-care systems show us that increased spending is not a prerequisite for a high-performing system.

However, these countries do universal health care differently.

Ben Eisen
Ben
Eisen

For example, several of them embrace the private sector either as a partner or an alternative for health-care delivery – providing expanded capacity, and promoting choice and competition – while retaining the principle of universal access.

Further, most countries with universal systems expect patients to share the costs of treatment through some form of cost-sharing and user-fees in order to encourage the responsible use of scare health-care resources. Of course, in order to ensure such payments are not a financial burden, these countries generally impose annual caps and either subsidize or exempt vulnerable populations such as the poor and chronically ill.

While there are a number of different options for how to reform Alberta’s health-care system, it’s clear that the province’s current model is unsustainable from a public finance perspective. If it aims to get its financial house in order and ensure the availability of scarce resources for other priorities, the provincial government must implement meaningful health-care policy reforms.

Bacchus Barua and Ben Eisen are analysts with the Fraser Institute. Mr. Barua is co-author of “The Sustainability of Healthcare in Canada.”

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Alberta health-care

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Bacchus Barua

Bacchus Barua is Associate Director of the Fraser Institute’s Centre for Health Policy Studies. He completed his BA (Honours) in Economics at the University of Delhi (Ramjas College) and received an MA in Economics from Simon Fraser University. Bacchus has conducted research on a range of key health care topics including hospital performance, access to new pharmaceuticals, the impact of aging on health care expenditures, and international comparisons of health care systems.

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