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Health spending fails to keep pace with inflation, population growth

The amount of money that individual Canadians and their governments dole out for health care is expected to rise by 2.7 per cent, according to a new report.

PAUL CHIASSON/THE CANADIAN PRESS/PAUL CHIASSON/THE CANADIAN PRESS

The amount of money that individual Canadians and their governments dole out for health care is expected to rise by 2.7 per cent this year, according to a new report that says 2016 will be the sixth year in a row in which health-care spending has not kept pace with inflation and population growth.

In a new overview of two decades of health-care expenditures, the Canadian Institute for Health Information (CIHI) says the past half decade looks a lot like the early and mid-1990s, when provincial governments, hobbled by the recession, put a lid on their health budgets.

"Our trend in health-care spending since 2010 is really about very moderate growth," said Michael Hunt, director of health spending and strategic initiatives at the CIHI, an independent agency that acts as the country's official clearing house for health-care statistics.

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"If you were to adjust for population growth, aging and inflation, there's been very little growth on a per-person basis in health-care spending, overall, across the country."

The CIHI's new report, released Thursday, comes as the country's finance and health ministers prepare to meet Monday to discuss a potential new health accord.

The provinces and territories have for months been pleading with Justin Trudeau's Liberals to back away from the previous government's plan to reduce the annual increase in health transfers to 3 per cent from 6 per cent, or the rate of economic growth tied to nominal GDP, whichever is higher.

The change is scheduled to kick in April 1, 2017, but the federal government signalled a willingness to bend after Mr. Trudeau dined with the premiers last Friday following a first ministers meeting on climate change.

The CIHI's forecast of 2.7-per-cent growth in 2016 includes spending by governments and by Canadians directly. If you subtract private spending, public spending on health care is expected to rise by 2.3 per cent this year, much less than in the decade leading up to the 2009 financial crash, when annual increases ranged from 6 to 9 per cent.

Although Ottawa has increased the Canada Health Transfer to provinces by 6 per cent a year since 2004, the federal contribution only makes up about a quarter of provincial health-care spending.

Provincial health ministers have been adamant that every health-care dollar they receive from the federal government goes to its intended purpose. They argue that if Ottawa reduces the 6-per-cent escalator, provincial health ministries will have to constrain already modest budget growth even further.

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Hospitals, doctors and drugs are the biggest drivers of growth in the health-care system. In 2014, the most recent year for which CIHI has final figures, spending on hospitals rose by 2 per cent, spending on doctors rose by 4.1 per cent and spending on drugs rose by 2.5 per cent.

But one year later, government spending on prescription pharmaceuticals spiked by 9.2 per cent, largely due to expensive new medications for hepatitis C – an example of how revolutionary drugs can sometimes upend a health system's bottom line.

In a separate report on public drug spending, also released Thursday, the CIHI found that two-thirds of the 9.2-per-cent increase could be attributed to Sovaldi and Harvoni, drugs that can cure hepatitis C, a potentially deadly liver disease, at an average cost of about $50,000 a patient.

"These are things that you have to treat. You probably really have no choice but to treat. [Sovaldi and Harvoni] are curative for hepatitis C in over 80 per cent of patients," Mr. Hunt said. "The benefit to the system is significant, but they add cost."

Overall public and private health-care spending per capita still varies significantly from province to province, the CIHI report found. Spending in 2016 is expected to be highest in Newfoundland and Labrador at $7, 256 a person, followed by Manitoba at $7,120. Spending is lowest in Quebec ($5,822 a person) and Ontario ($6,144.)

Health spending in the territories is more than double what it is elsewhere because the health-care system has to care for a small population scattered across vast remote regions.

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Health costs are expected to come in at $12,429 in Yukon, $15,065 in Northwest Territories and $14,301 in Nunavut.

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Health reporter

Kelly Grant is a health reporter with The Globe and Mail. More

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