Canada’s Health Spending Hits Slowest Growth Rate Since 1997

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National Health Expenditure Trends, 1975 to 2014

October 30, 2014—Health spending in Canada is projected to post its slowest growth rate since 1997, a trend that has emerged over the last 4 years, according to new data released today by the Canadian Institute for Health Information (CIHI). While expenditures are increasing annually, the rate of spending is at 2.1%—a record low over the last 17 years.

“A 2.1% increase translates to $4.5 billion. In terms of total health spending, the country is expected to spend $214.9 billion in 2014,” says David O’Toole, president and CEO of CIHI. “That’s $6,045 per Canadian, only about $61 more per person than last year.”

Spending on biggest-ticket items slowing

Drugs, hospitals and physician compensation have traditionally represented the top 3 cost drivers in the health system, calling for continuous focus on and innovative resource management of these line items.

“Drug expenditures are slowing down. With a 0.8% increase, they will reach $33.9 billion in 2014,” says Brent Diverty, CIHI’s vice president of Programs. “With generic pricing control policies for the pharmaceutical industry, the expiration of patents on prevalent medications and fewer new drugs entering the market, we are seeing what amounts to flattened growth.”

With 2.1% projected growth, hospital spending will reach $63.5 billion in 2014. About 60% of these hospital costs relate to worker remuneration, particularly for nurses. Inflation and compensation have been major factors in the growth of hospital costs, as have the costs of new and emerging technology and the expansion of hospital services.

Growth in physician spending is the highest of the 3 cost drivers, at 4.5%, but is slowing as well because provincial health ministries have negotiated minimal pay increases over recent contract periods. Physician spending is estimated to reach $33.3 billion in 2014.

Population aging only a modest cost driver

Contrary to fears that senior citizens will suddenly overwhelm Canada’s health care budgets, population aging is estimated to increase health care costs by only 0.9% per year; however, this trend is expected to change incrementally over the next 20 years.

“While concerns regarding demographics are understandable—Canadians over the age of 65 account for less than 15% of the population but consume more than 45% of provinces’ and territories’ health care dollars—the share of public-sector health dollars spent on Canadian seniors has not changed significantly over the past decade,” says Diverty.

Future concerns relate to the appropriate use of hospital care, long-term institutional care and community care for older adults—use that balances access, quality and cost. There are 5.2 million Canadians now over the age of 65 (the first wave of baby boomers will turn 75 in less than a decade). In 2012, per person spending for seniors ranged widely:

  • $6,368 for those age 65 to 69
  • $8,545 for those 70 to 74
  • $11,692 for those 75 to 79
  • $21,054 for those 80 and older

Variations across the country and around the world

Health spending per person also varies among provinces. In 2014, it is expected to be highest in Newfoundland and Labrador and Alberta, at $6,953 and $6,783, respectively. Quebec and British Columbia are expected to spend the least, at $5,616 and $5,865. Per person costs are expected to be higher in the territories due to their small, dispersed populations.

The range across Canada exists because the population of each jurisdiction varies as do its health care needs. Other factors also affect per capita spending, including how health services are organized, how health personnel are compensated, and how costs are shared between public and private sectors.

Internationally, Canada remains in the top 10 countries in the Organisation for Economic Co-operation and Development in terms of per person spending on health care. In 2012, Canada spent US$4,602. That’s comparable to Germany (US$4,811), Denmark (US$4,698) and Luxembourg (US$4,578)—and considerably less than the United States (US$8,745).

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How much is being spent on health care?



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