Trends in health care spending with 40 years of data

National Health Expenditure Trends, 1975 to 2015

October 29, 2015 — In 2015, health spending in Canada will continue a pattern of slow growth that began in 2011, according to data released today by the Canadian Institute for Health Information (CIHI).

Spending is projected to grow by $3.4 billion this year to reach $219.1 billion in 2015. This amounts to $6,105 per Canadian, about $35 more per person than last year.

“CIHI has the unique advantage of 40 years of health expenditure data, and that allows us to look at patterns and trends in the past to determine lessons for the future,” said Brent Diverty, CIHI’s vice president of Programs. “Across industrialized nations, health care spending is linked with economic growth, and periods of low or no growth in spending are generally followed by times of rapid increases — that will be something for Canada to potentially prepare for in coming years.”

Report highlights

  • Taken as a share of gross domestic product (GDP), health care spending has trended upward over the last 40 years, going from 7% in 1975 to almost 11% in 2015. Health care spending is expected to grow by less than the rate of inflation and population growth combined.
  • The top 3 cost drivers in Canadian health spending are hospitals, drugs and physicians, which make up 60.7% of all health expenditures. Hospitals (including nursing staff) represent 29.5% of total health expenditures, while drugs represent 15.7% (prescribed: 13.3%; non-prescribed: 2.4%) and physicians represent 15.5%.
  • While the top 3 cost drivers have remained constant over time, the relative shares have shifted. Most notably, the share of health care spending that goes toward physicians has increased, returning to levels seen in the late 1980s.

Will the past predict the future?

National Health Expenditure Trends, 1975 to 2015 is the 19th edition of this annual publication. The report provides a macro view of Canadian health spending trends, including both public- and private-sector trends.

Over the past 40 years, 4 distinct periods of growth in health spending can be identified. Between 1975 and 1991, the average annual growth rate was 2.7%, after accounting for inflation and population growth. During the mid-1990s, a period of fiscal restraint, the rate declined by an average of 0.5% per year. The late 1990s to 2010 was a period of reinvestment, with an average rate of growth of 3.3% per year. Since 2011, health spending has not kept pace with inflation and population growth, declining by an average annual rate of 0.6%. Current trends appear similar to those of the fiscal restraint period of the mid-1990s.

Looking at the top 3 cost drivers for health spending (hospitals, drugs and physicians), hospital spending is at the lowest rate of growth since the late 1990s and drug expenditures have slowed, largely due to generic pricing control policies, expiring patents on medications and fewer new drugs emerging on the market. But expirations have a one-time impact and expensive new drugs will start to appear.

The third major cost driver, physician spending, has outpaced that of hospitals or drugs since 2007, due in part to more rapid growth in the supply of physicians and the increase in physician fees. According to CIHI’s Canadian Medical Education Statistics 2014, released in September, the number of MD degrees awarded in Canada increased by 14.5% between 2010 and 2014. If high levels of physician employment remain, growth in physician spending is poised to continue.

Please refer to the attached backgrounder for additional highlights.

About NHEX

2015 is the 40th year for National Health Expenditure Database (NHEX) data. This data holding’s annual report provides an overview of how much is spent on health care annually, in what areas money is spent and on whom, and where the money comes from. It features comparative expenditure data at the provincial/territorial and international levels, as well as Canadian health spending trends from 1975 to the present.

CIHI will mark this milestone with a panel discussion, hosted by the Economic Club of Canada at the Fairmont Château Laurier hotel, at 1 Rideau St. in Ottawa on Thursday, October 29. The panel — Canadian Medical Association President Dr. Cindy Forbes, Dr. David Naylor from the University of Toronto, Don Drummond of Queen’s University and CIHI Vice President Brent Diverty — will discuss how 40 years of NHEX data can help inform the sustainability of health care systems in Canada. Media are welcome at this event, which takes place in the Adam Room, from 11:30 a.m. to 1:30 p.m.

About CIHI

CIHI collects and analyzes information on health and health care in Canada and makes it publicly available. Canada’s federal, provincial and territorial governments created CIHI as a not-for-profit, independent organization dedicated to forging a common approach to Canadian health information. CIHI’s goal: to provide timely, accurate and comparable health information. CIHI’s data and reports inform health policies, support the effective delivery of health services and raise awareness about the factors that contribute to good health and health care.

For examples of how CIHI data is helping support quality care initiatives in featured health care facilities, see the most recent success stories on our YouTube channel.