Total health expenditure in Canada climbs to over $308 billion in 2021
How much will Canada spend on health in 2021?
Total health spending in Canada is expected to reach $308 billion in 2021, with growth of around 2.2%. This will represent 12.7% of Canada’s gross domestic product and equal $8,019 per Canadian.
Health spending has trended upward since 1975, both in current dollars and in 1997 constant dollars. In current dollars, health spending reached around $100 billion in 2000 and around $200 billion in 2011, and is expected to reach $300 billion in 2020.
Source
National Health Expenditure Database, Canadian Institute for Health Information.
Total health spending in Canada is expected to reach a new level at $308 billion in 2021, or $8,019 per Canadian, following a surge in spending, particularly in 2020, due to the pandemic.
Total health expenditure in Canada rose by 12.8% in 2020 due to pandemic response funding. The estimated growth rate for 2021 (2.2%) is more in line with what we’ve seen in pre-pandemic years. Federal, provincial and territorial governments (combined) budgeted $30.6 billion in 2020 and $22.8 billion in 2021 for health-specific funding to deal with COVID-19. Prior to the pandemic, from 2015 to 2019, growth in health spending averaged 4% per year.
It is anticipated that health expenditure will represent 12.7% of Canada’s gross domestic product (GDP) in 2021, following a high of 13.7% in 2020.
Historically, as reported in a C.D. Howe Institute analysis (PDF), governments routinely overshoot (i.e., spend more than) their estimates by 0.8% annually. For the 2019 data year, actual provincial/territorial government health expenditures in Canada were not far off the estimates (0.2% higher than the 1-year-ahead preliminary estimate and 0.4% higher than the 2-year-ahead preliminary estimate). This year’s spending estimates, once actuals are known, may experience larger revisions due to uncertainty about COVID-19 pandemic spending.
Historical relationship between health spending and economic growth
Historically, Canada — like other Organisation for Economic Co-operation and Development (OECD) countries — has seen health spending grow similarly to, and at times faster than, the overall economy. In 2020, health spending growth spiked at 12.8% due to additional funding to scale up health system capacity, testing, vaccinations and other responses to the pandemic. At the same time, measures related to contain the spread of the virus (e.g., travel restrictions, lockdowns, closure of non-essential businesses) negatively affected the economy, resulting in a 4.6% drop in the GDP growth rate.
Total health expenditure and GDP, annual growth rates, Canada
| Year | GDP | Health expenditure | GDP projections* |
|---|---|---|---|
| 2002 | 4% | 7% | n/a |
| 2003 | 5% | 7% | n/a |
| 2004 | 6% | 6% | n/a |
| 2005 | 6% | 7% | n/a |
| 2006 | 5% | 8% | n/a |
| 2007 | 5% | 8% | n/a |
| 2008 | 5% | 6% | n/a |
| 2009 | -5% | 6% | n/a |
| 2010 | 6% | 6% | n/a |
| 2011 | 6% | 3% | n/a |
| 2012 | 3% | 4% | n/a |
| 2013 | 4% | 2% | n/a |
| 2014 | 5% | 3% | n/a |
| 2015 | 0% | 4% | n/a |
| 2016 | 2% | 4% | n/a |
| 2017 | 6% | 4% | n/a |
| 2018 | 4% | 4% | n/a |
| 2019 | 4% | 4% | n/a |
| 2020f | -5% | 13% | n/a |
| 2021f | 10% | 2% | n/a |
| 2022 | n/a | n/a | 6% |
| 2023 | n/a | n/a | 4% |
| 2024 | n/a | n/a | 4% |
| 2025 | n/a | n/a | 4% |
Notes
* Data from Budget 2021.
GDP: Gross domestic product.
n/a: Not applicable.
f: Forecast.
Sources
National Health Expenditure Database, Canadian Institute for Health Information.
Budget 2021: A Recovery Plan for Jobs, Growth, and Resilience, Department of Finance Canada.
Governments’ fiscal position influences health spending trends
Prior to the pandemic, federal and provincial/territorial governments recorded budget deficits, which constrained health spending growth.
Historically, health spending growth is flat during periods of fiscal restraint. This was the experience from 1993 to 1996 and from 2011 to 2014, when governments put in place plans to reduce or eliminate budget deficits.
The marked decline in economic activity in 2020, coupled with fiscal measures in response to the pandemic, has caused government deficits to reach record highs. The anticipated need for fiscal restraint in the future could have a dampening effect on health spending.
Total health expenditure per capita, annual growth rates after inflation,* Canada, 1976 to 2021
- 1975 to 1991: This was a period of sustained growth in health spending. The average annual growth rate was 2.7%, with a spike of spending growth in the early 1980s.
- Mid-1990s: Total health expenditure declined by an annual average rate of 0.5% during this period of fiscal restraint.
- Late 1990s to 2010: This period of reinvestment in health care saw health spending increase by an average rate of 3.3% per year.
- 2010 to 2014: In this period of fiscal restraint, total health expenditure increased by an annual average rate of 0.1%.
- 2014 to 2019: This has been a period of emerging growth, and health spending per capita is estimated to increase in real terms by an average of 1.6% per year.
- 2020: 6.5%.
- 2021: 0.1%.
Notes
* Calculated using constant 1997 dollars.
See data table A.1 in the companion Excel file.
Source
National Health Expenditure Database, Canadian Institute for Health Information.
Hospitals, Drugs and Physicians — Still the 3 largest health spending categories
Hospitals (25%), Drugs (14%) and Physicians (13%) are expected to continue to account for the largest shares of health dollars (over 50% of total health spending) in 2021. A new spending category — COVID-19 Response Funding — makes up 7% of total health spending, which includes federal direct and provincial/territorial government–sector spending. This is budgeted funding for health-related activities associated with the time-limited emergency response to the COVID-19 pandemic that do not fall into one of the other NHEX spending categories (e.g., Hospitals, Other Institutions). (Note that some COVID-19–related spending may be included in other NHEX categories.)
COVID-19 Response Funding includes several broad areas such as treatment costs (30%), testing and contact tracing (10%), vaccination (27%), medical goods (31%) and other related expenses (1%).
The COVID-19 pandemic presented an unprecedented medical challenge for hospitals. To limit the spread of disease and create additional inpatient capacity and staffing for COVID-19 treatment, some hospitals closed outpatient departments and/or reduced elective visits and procedures. According to CIHI’s analysis of COVID-19’s effect on hospital care services, from March to December 2020, overall surgery numbers fell 22% compared with the same period in 2019, representing about 413,000 fewer surgeries. Alongside spending reductions, there were spending increases, as additional resources were needed to treat COVID-19 patients. Per CIHI’s 2021 report on hospital spending, the estimated average cost of a COVID-19 hospital stay was 3 times the average cost of a stay for a heart attack.
Continued growth in claims associated with specialty drugs and higher costs per claimant for chronic maintenance users contributed to increases in drug spending. Less use of acute medications (e.g., medications used for infections) will likely lead to reduced drug spending.
Some physician care in 2020 was deferred due to the pandemic. As stated in CIHI’s recent analysis on how COVID-19 affected physician services, in the 4 provinces where data is available to CIHI (Nova Scotia, Ontario, Manitoba and Alberta), the number of patient visits (in-person and virtual) for all physicians dropped by 6% in Manitoba, 8% in Nova Scotia, 12% in Ontario and 15% in Alberta from March to December 2020. Some of this care resumed in 2021, which contributed to a rebound in physician spending.
During the COVID-19 pandemic, the provision of health care in Canada has changed and this may cause shifts among health spending categories. The continuing evolution is an issue to monitor. For example,
- The rapid spread of COVID-19 in Canada’s long-term care (LTC) homes has caused policy-makers to focus on LTC investment and reform.
- The expansion of virtual services is leading to new ways of delivering care that maintain or improve quality and also have the potential to reduce cost.
- There’s a continued focus on public health investments to maintain the health of the Canadian population and prepare for future pandemics.
Share of total health expenditure by health spending category,* Canada, 2021f
| Category | Share of health expenditure |
|---|---|
| Hospitals |
25% |
| Drugs | 14% |
| Physicians | 13% |
| Other Institutions | 11% |
| Other Professionals | 8% |
| COVID-19 Response Funding (public sector) | 7% |
| Public Health | 5% |
| OHS: Other Health Spending | 5% |
| OHS: Home and Community Care (provincial/territorial government only) | 4% |
| Capital | 4% |
| Administration | 3% |
Notes
* Administration expenditures in the National Health Expenditure Database (NHEX) are related to the cost of providing health insurance programs by the government and private health insurance companies and all costs for the infrastructure to operate health departments. This category includes, for example, expenditures for the human resources and finance departments within ministries of health. Please see the Methodology Notes for details.
OHS: Other Health Spending.
f: Forecast.
Numbers do not add up to 100 due to rounding.
See the Methodology Notes for health spending category definitions.
Source
National Health Expenditure Database, Canadian Institute for Health Information.
Spending as the population ages
Has health spending on seniors changed?
From 2009 to 2019, the share of health expenditure spent on Canadians age 65 and older increased slightly from 44.5% to 45.1%. At the same time, the percentage of seniors in the population grew from 13.9% to 17.5%.
By comparison, over the same time period, the share spent on Canadians age 1 to 64 dropped from 52.4% to 52.0%, and this age group’s share of the population dropped from 85.0% to 81.5%.
Finally, the share spent on Canadian infants younger than age 1 stayed almost the same: 3.0% for 2009 and 2.9% for 2019. The percentage of infants in the population stayed almost the same: 1.1% in 2009 and 1.0% in 2019.
Note
Numbers may not add up to 100 due to rounding.
Source
National Health Expenditure Database, Canadian Institute for Health Information.
While Canadians age 65 and older account for about 18% of Canada’s population (up from 14% a decade ago), they continue to consume about 45% of all public-sector health care dollars spent by the provinces and territories.
As the population continues to age, decision-makers face the challenge of determining the level of care (hospital, long-term institutional and community care) for older Canadians that balances access to, and quality and appropriateness of care with the cost of care.