Canada’s health care spending growth slows

October 30, 2012—Total health care spending in Canada is expected to reach $207 billion in 2012, averaging $5,948 per person. Figures in National Health Expenditure Trends, 1975 to 2012, released today by the Canadian Institute for Health Information (CIHI), show that the pace of growth is slowing.

Modest economic growth and budgetary deficits are having a moderating effect. For the third straight year, growth in health care spending will be less than that in the overall economy. The proportion of Canada’s gross domestic product (GDP) spent on health care will reach 11.6% this year—down from 11.7% in 2011 and the all-time high of 11.9% in 2010.

“Provincial and territorial governments today are focused on controlling health care costs,” explains CIHI’s President and CEO, John Wright. “Unlike in the past, they’re not cutting programs as much as looking at improving productivity, reducing overhead, controlling compensation and seeking value-for-money initiatives.”

Slower growth in hospital, drug and physician spending

Hospitals (29.2%), drugs (15.9%) and physician services (14.4%) continue to account for the largest shares of health dollars.

Compensation paid to health care providers has been one of the most significant cost drivers of hospital and physician spending. Increases in compensation due to higher demand as well as to growth in the number of hospital workers and physicians have contributed to higher spending during the last decade. Controlling the cost of health professional services and changing scopes of practice have been priorities for jurisdictions. In 2012, hospital spending will grow by 3.1%, while payments to physicians will increase by 3.6%. These will be the lowest rates of growth since the late 1990s.

The growth rate for drug spending will fall to 3.3% in 2012, down from 4% last year. Drug spending growth rates have trended downward over the last 10 years. This decline is likely due to fewer drugs coming on the market in the last decade, many blockbuster drugs coming off patent and jurisdictions introducing generic pricing controls.

“Compensation is one area of focus for some jurisdictions as they wrestle with controlling their health spending,” explains Jean-Marie Berthelot, Vice President of Programs at CIHI. “Other initiatives, such as Lean projects to improve efficiencies in delivering care and changing generic drug pricing policies, are key to managing costs.”

Variations in provincial/territorial government spending on health

Provincial and territorial governments are forecast to spend $135 billion in 2012, accounting for 65% of total health expenditure in the country. Provincial and territorial government health care spending continues to vary by province, with spending per person expected to be highest in Newfoundland and Labrador and Alberta, at $5,190 and $4,606, respectively. Quebec and British Columbia are expected to have the lowest health expenditure per capita, at $3,513 and $3,690, respectively.

“Provincial spending can be affected by differences in population health care needs, health system structure and health personnel compensation,” says Mr. Berthelot.

While population aging has been a modest cost driver overall, accounting for 0.9% of average annual growth in health care spending from 2000 to 2010, the impact varied by province. It was more significant in the Atlantic provinces and Quebec than in Ontario and the west.

In 2011, the latest year for which data is available, health care was estimated to account for about 38% of provincial/territorial government spending; this share has been relatively stable for more than five years. However, it varied among the provinces in 2011, from 30.1% in Quebec and 35.8% in Saskatchewan to 44.3% in Manitoba and 47.9% in Nova Scotia.

During the past decade, provincial and territorial government per capita health spending increased by an average 5% per year. In 2012, provincial growth rates will range from 4.9% in Prince Edward Island and 4.1% in Newfoundland and Labrador to 0.7% in New Brunswick and 1.2% in Ontario.

Other highlights

• Health system decision-makers will face the challenge of finding appropriate care for older Canadians that balances access, quality and appropriateness of care on the one hand and cost on the other. In 2010, the latest available year for data broken down by age group, per person spending for seniors increased with age: $6,223 for those age 65 to 69, $8,721 for those 70 to 74, $12,050 for those 75 to 79 and $20,113 for those 80 and older.
• For more than a decade, the public sector has accounted for about 70% of the total health care bill and the private sector for 30%.
• Among 30 countries in the Organisation for Economic Co-operation and Development (OECD) that had comparable accounting systems in 2010, the latest year for which data is available, spending per person on health care remained highest in the United States (US$8,233). Canada was in the top quartile of countries in terms of per person spending on health, spending US$4,445; this amount was similar to those for several other OECD countries, including Denmark (US$4,464), Austria (US$4,395) and Germany (US$4,338).

Sandra Koppert
613-694-6280
Cell: 613-297-7792
media@cihi.ca

Crystal Mohr
613-694-6260
Cell: 613-612-3808
media@cihi.ca

About CIHI

CIHI collects and analyzes information on health and health care in Canada and makes it publicly available. Canada’s federal, provincial and territorial governments created CIHI as a not-for-profit, independent organization dedicated to forging a common approach to Canadian health information. CIHI’s goal: to provide timely, accurate and comparable information. CIHI’s data and reports inform health policies, support the effective delivery of health services and raise awareness among Canadians of the factors that contribute to good health.