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Jeffrey Simpson (Bill Grimshaw)
Jeffrey Simpson (Bill Grimshaw)

Jeffrey Simpson

Health spending keeps rising, and it only gets worse Add to ...

Quick now, which area of spending in Canada jumps about $10-billion every year?

It isn't postsecondary education, so critical to Canada's future prosperity. And, no, it isn't defence, the Afghanistan mission notwithstanding. That's not a permanent expenditure.

A brief moment's thinking can produce only one answer: health care. In 2009, we'll spend about $183-billion on health care. Last year, we spent $173-billion; the year before that, $163-billion.

Like a gift that keeps on giving, budgets for health care just keep on taking. From 1996 to 2007, health-care spending in Canada rose at a rate of 4.7 per cent yearly - after inflation. In 2008, it rose 5.4 per cent faster than inflation, and this year 3.3 per cent.

The indispensable Canadian Institute for Health Information keeps us abreast of what is happening in health care every year. No one doubts the CIHI numbers, but they interpret them in predictable ways.

Unreconstructed defenders of the Canadian system say, "So what?" Americans spend a lot more of their national income on health care and look what a mess they are in. Anyway, what's another 3 or 4 or 5 per cent above inflation? We can afford it. We're rich.

Indeed, we are rich, relative to most other countries. We spend $5,452 per capita on health care (compared with $5,211 last year and $4,889 in 2007), and that spending approximates what the French, Germans and Dutch spend. Wealthy populations spend a lot on their health. So what?

The unreconstructed defenders maintain that lots of waste and inefficiency can be eliminated. Actually, administration isn't the problem, because the share of total health-care spending on administration is lower than in 1975.

Back then, Canada spent about 7 per cent of its national income on health care. In 2009, it will be about 11.9 per cent.

Spend more each year on health care beyond inflation and something has to give.

But let's be fair. This year has been an economic downer. When the economy slumps and health-care costs keep rising, health care's share of the national income will jump. Which it did, from 10.8 per cent in 2008. Even without the recession, however, health care's share of national income would still have been above 11 per cent, up from 7 per cent in the mid-1970s.

Hospitals' share of total spending keeps going down; drug costs keep going up. Aha, say certain analysts of the remorseless rise in health-care spending. Give Canada a national pharmacare program to curtail the increases in costs.

Quebec has one of those. Quebeckers above a certain income pay premiums for drugs, but the state pays roughly 80 per cent of the costs. Since its introduction in 1997, government costs have more than tripled; since 2002, when changes were made to the plan, public costs have almost doubled. So if the Quebec experience is any guide, public drug coverage might bring social benefits, but it doesn't curtail costs.

You might think that provincial governments would be focusing on reducing the increase, at least. Instead, most of them are averting their eyes. They are doing so, in part, because since 2004-05, Ottawa has been shovelling money at them for health care - an additional $4-billion a year, indexed at 6 per cent.

That money doesn't make things better, since 6 per cent is roughly the rate of health-care inflation, but at least the federal infusion helps to prevent things from getting worse. The federal-provincial accord of 2004-05 was signed when Ottawa enjoyed surpluses. When the pact expires in 2014-15, the federal government will be in deficit. Either it will keep up that level of transfer payments, in which case other programs will be restrained, or the transfers will decline.

There's the dilemma every government in Canada faces, yet none wishes to draw public attention to it because of the political risks. Spend more each year on health care beyond inflation and something has to give.

For now, the answer to what must give is government borrowing because of the recession. But with health care eating more and more of every province's budget - 45 per cent in Ontario - other programs will suffer or debt will rise, or both.

And look what's coming: aging. For people aged 1 to 64, health-care costs are $3,089 per person. For those 70 to 74, the cost is $7,732; for those 75 to 79, $10,469; for those over 80, $17,469.

The share of older folks in the population will soon start rising rapidly. It's not hard to figure out the impact on health-care budgets.

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