OTTAWA – Health care spending in Canada is set to reach a new high in 2011, topping $200 billion, according to a report released Thursday by the Canadian Institute for Health Information.
The increase is driven by the salaries of health care professionals, and not by the aging population (often pegged as the greatest liability to the health care system).
The aging population is considered a “modest” cost driver, accounting for less than one per cent of the average annual growth in health care spending per year during 1998 to 2008. The study only focused its analysis on that particular decade.
“While the Canadian population is aging, it is aging slowly as a whole,” says Jean-Marie Berthelot of CIHI. “Over the past decade the proportion of health spending has remained relatively stable at 44 per cent. This tells us that spending on seniors is not growing faster than spending for the population at large.”
Paying health care professionals whether they work in hospitals or other settings is the major driver of costs in the health care system according to the report.
Between 1998 and 2008 the number of health care workers grew by 21 per cent and their hourly wage increased by an average of 3.7 per cent, an entire percentage point higher than in the general economy. Doctors salaries grew by 3.6 per cent during that same time frame.
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CIHI attributes the rise in costs to factors like higher competition between provinces to recruit and retain doctors, stronger unions and tighter credentialing of health professionals.
Other growth factors
More minor contributors to cost increase included population growth, which jacked up costs by 1 per cent annually.
Drug spending also grew quickly, averaging a 10 per cent annual increase between 1998 and 2008. Cancer drugs and immunosuppressants were among the fastest-growing drug categories.
Canadians are seeing their doctors and getting medical procedures more frequently, growing by 1.5 per cent annually per Canadian, according to the report.
The aging population did have an impact on the types of procedures used as hip and knee replacements and cataract services were among the fastest growing procedures. MRI and CT scans are also growing in number.
A downward trend
Despite hitting the $200-billion milestone, the numbers actually suggest that growth in spending is slowing down. This year’s growth of $7 billion represents a rate of 4 per cent, the lowest annual growth in the last 15 years. Average increase between 1998 and 2008 was 7.4 per cent.
It’s a trend that is set to continue, according to CIHI.
“Weaker prospects for economic growth combined with fiscal deficits and fewer savings from debt service charges could have a dampening effect on the future growth of health spending,” the report states.
The report cites a boom period in health spending between 1998 and 2008, driven by a period of economic growth and higher government revenue.
The circumstances since 2008 have changed dramatically, with Canada weathering a brief recession in 2008/2009.
The global economy is in turmoil once again thanks to a sovereign debt crisis in Europe. While economists are still predicting growth in the Canadian economy in the medium term, everything depends on what happens overseas.
“In light of global economic uncertainty and efforts here at home to address government deficits, it’s important to examine what’s been driving health care costs in order to better plan for the future of the health system,” says John Wright, the president of CIHI.
The report breaks out health spending into three distinct periods over the past 35 years, starting with a growth phase from 1976 to 1991; a period of contraction in the belt-tightening, deficit years of 1992 to 1996; and, a growth phase starting in 1997 where health care topped the agenda for Canadians.
Along with the economy, an aging population, price inflation, continually rising salaries and hospital costs, and the growing availability of generic drugs are all predicted by the report’s authors to impact health costs in the future.
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