The Fraser Institute

The Fraser Institute

November 30, 2009 06:30 ET

The Fraser Institute: Ontario, New Brunswick on Pace to Spend Half of All Revenue on Health Care by 2014; Four Other Provinces Expected to Hit 50 Per Cent by 2034

TORONTO, ONTARIO--(Marketwire - Nov. 30, 2009) - Provincial spending on health care continues to grow faster than provincial revenues, with six out of 10 provinces projected to be spending half of all available revenue on health care by 2034, according to a new report from the Fraser Institute, one of Canada's leading economic think-tanks.

Ontario and New Brunswick face the biggest crunch, where health expenditures are on pace to consume half of total provincial revenues by 2014 or earlier.

The study suggests that Prince Edward Island will likely reach the 50 per cent point within 10 years, followed by Nova Scotia in 15 years, Manitoba in about 17 years, and Quebec in 25 years.

"Health spending has increased at an unsustainable rate in the majority of provinces over the past decade," said Brett Skinner, Fraser Institute Director of Bio-Pharma, Health, and Insurance Policy and lead author of Paying More, Getting Less: 2009 Report.

"Unless provincial governments can devise a better way to finance health care, they will be forced to either hike taxes, expand rationing of medical goods and services, or make extensive cut backs in other government programs."

Paying More, Getting Less: 2009 Report is the Fraser Institute's sixth annual report on the financial sustainability of provincial public health insurance. The peer-reviewed study makes projections using Statistics Canada data on the most recent 10-year trends for provincial government health expenditures and total available provincial government revenue from all sources.

Skinner points out that while the 10-year trend confirms the urgency of the sustainability problem, more recent one-year trends are even more concerning.

"Over the past year, health spending in Ontario is on pace to consume 50 per cent of total available revenue in the province by the end of next year," he said.

The report points out that some provinces have tried to address the sustainability problem by raising tax burdens. Skinner argues that this approach is misguided.

"Tax hikes reduce economic growth in the long run, resulting in job losses and increased demand for government spending on employment insurance and social assistance programs. Attempting to drive long-term revenue growth through tax increases is futile, and if introduced at this time, would only further delay economic recovery from the recession," he said.

The report also chronicles how provinces have tried to cut health spending using blunt, centrally imposed rationing. Provincial governments are increasingly forcing Canadians to accept less from public health insurance by reducing the supply of physicians and nurses, allowing hospital infrastructure to deteriorate, and refusing to cover new medical technologies. All of which contributes to long wait times for health care services, Skinner notes.

"Despite these misguided efforts, health spending is still growing faster than the ability of government to pay for it."

The report concludes that Canada's current public health insurance system is simply not financially sustainable through public means alone and recommends several changes:

  • encourage the efficient use of health care by requiring patients to make copayments for all publicly funded medical goods and services they use;
  • relieve cost pressures facing the public health insurance system by legally recognizing the moral right of patients to pay privately (out of pocket or through private insurance) for all types of medical goods and services, including hospitals and physician services, as is currently allowed for access to prescription drugs;
  • allow health providers to receive reimbursement for their services from any insurer, whether government or private;
  • shift the burden of medical price inflation onto the private sector by allowing providers to charge patients fees in addition to the government health insurance reimbursement level; and
  • create incentives for cost and quality improvements by permitting both for-profit and non-profit health providers to compete for the delivery of publicly insured health services.

Skinner suggests that Canada follow the example of Switzerland or the Netherlands, where the government is not responsible for providing health or drug insurance. Instead, individuals in those countries are required by law to purchase comprehensive health insurance in a regulated, pluralistic private-sector market, and the government provides low-income subsidies so that everyone can afford coverage.

"Sustainable, high-quality health care is possible, but not under Canada's current system. Canadians will continue to pay more and get less from their health care system unless major health policy changes are introduced," he said.

The complete report including graphs and table is available as a free PDF at www.fraserinstitute.org.

The Fraser Institute is an independent research and educational organization with locations across North America and partnerships in more than 70 countries. Its mission is to measure, study, and communicate the impact of competitive markets and government intervention on the welfare of individuals. To protect the Institute's independence, it does not accept grants from governments or contracts for research.

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