The Fraser Institute

The Fraser Institute

October 31, 2005 07:00 ET

The Fraser Institute: Media Release-Provincial Health Care Spending in Canada is Unsustainable According to New Study

TORONTO, ONTARIO--(CCNMatthews - Oct. 31, 2005) - Based on the most recent five-year trends, Medicare is on pace to consume more than half of total revenues from all sources in 7 of 10 provinces by the year 2022. If the relative pace of health spending and revenue growth does not change, public expenditures on health care will swallow two thirds of total revenues in these provinces by the year 2032, eventually reaching 100 per cent by 2050, according to Paying More, Getting Less 2005, released today by The Fraser Institute.

Five, eight, and 30-year trends all indicate that health spending has been growing faster on average than total revenue in all provinces, also outpacing inflation and economic growth. The end result of this disparity is that health care is taking up an increasing share of provincial revenues over time.

Among the provinces Ontario is the worst, with public health spending set to exceed 50 percent of revenue only six years from now in 2011, reaching two-thirds of revenue by 2017 and 100 percent of revenue by the end of 2026 if trends continue.

Prince Edward Island, New Brunswick, British Columbia, Manitoba, Saskatchewan, and Newfoundland and Labrador are all in the middle of the pack, having from 12 to 17 years before public health spending consumes 50 percent of revenue.

Meanwhile, Nova Scotia, Alberta, and Quebec are in relatively better positions to sustain health care spending compared to the other provinces, reaching the 50 percent warning mark later. Quebec is the single best case with public health spending on pace to reach 50 percent of revenue by 2061 in that province.

However, large increases in the tax burden in Nova Scotia and Quebec, as well as rising oil revenues in Alberta create the misleading perception that they are doing better. "But paying more taxes is not a sustainable option. Taxes cannot be increased every year without damaging provincial economies, and oil revenues will not rise at the same pace indefinitely. Once revenue growth returns to normal, their sustainability dates will occur much closer to the other provinces," said Brett Skinner, author of the paper and the Institute's director of health and pharmaceutical policy research.

Furthermore, if the interest cost of servicing the accumulated debt in each province is considered a fixed expense, then total revenues available for program spending are even smaller. This means that all provinces will hit the 'wall' sooner than projected here.

"Canadians should also know that these projections do not take into account the added pressures from an ageing population that will further accelerate the growth of provincial health spending as a percentage of total revenue. The inevitable ageing of Canada's population will only make health care unaffordable much sooner than predicted here," Skinner pointed out.

"Yet, even without counting these added pressures, the analysis shows that the current public health care system in Canada is financially unsustainable," he added.

Skinner notes that governments have cynically tried to constrain growth in health spending by rationing access to publicly insured goods and services. This has resulted in unacceptably long waits for medical services; reduced access to health professionals and high tech equipment; fewer hospitals and the physical deterioration of existing facilities; the withdrawal of public insurance coverage for previously insured medical goods and services, and the delay, or outright refusal to provide public insurance coverage for new treatments and technologies that are available in other countries.

Getting less from health care is not a sustainable policy option for controlling the annual growth in public health spending. Patients will experience increasing medical risks from waiting if rationing is used to hold down the growth in public health spending indefinitely.

Rather than rationing access to publicly covered health care, Skinner points out that the prescription for reform is to introduce the kinds of policies increasingly being used in other countries to deal with similar cost-control problems in their public health care programs. In very general terms, these policies include:

- Requiring patients to make co-payments for publicly insured health services;

- Allowing people the option of paying privately (via private insurance or out-of-pocket) for all types of medical services, including hospitals and physician services;

- Allowing both for-profit and non-profit health providers to compete for the delivery of publicly insured health services.

"As long as Canadians refuse to embrace these internationally proven policy solutions, they can expect to continue paying more and getting less when it comes to health care. Provincial governments will be forced to either spend less on other public priorities as health care spending swallows a larger and larger share of available revenues every year, impose economically harmful tax increases or further limit access to medically necessary treatment," Skinner concluded. "The status quo is just not sustainable."

Established in 1974, The Fraser Institute is an independent public policy organization with offices in Vancouver, Calgary, and Toronto. The media release and study (in PDF) are available at www.fraserinstitute.ca.


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