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 healthcare costs.
Since 1998, healthcare spending in Alberta has increased by 317.1 percent – faster than in any other Canadian province – outpacing population growth, inflation, growth in government spending on other programs, and provincial economic growth. Subsequently, while healthcare spending consumed 34.1 percent of the province’s budget in 1998, it ended up consuming 42 percent of total program spending in 2015.
Given this trend, and expectations regarding inflation and a growing and aging population, a new study estimates that healthcare spending could consume 47 percent of the province’s budget by 2030.
Further, based on forecasts available last year, healthcare spending as a share of provincial GDP (the value of all goods and services) is projected to grow from 5.9 percent in 2015 to 10.4 percent 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 healthcare 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 healthcare 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 healthcare systems show us that increased spending is not a prerequisite for a high-performing system.
However, these countries do universal healthcare differently.
For example, several of them embrace the private sector either as a partner or an alternative for healthcare 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 healthcare 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 healthcare 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 healthcare 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.”