Early Headlines about Restraint in Healthcare Spending Often Misleading – C.D. Howe Institute

initial estimates based on provincial budgets have typically misled Canadians

September 7, 2016 – Revised estimates for 2014 healthcare spending growth show increases larger than initially reported – which continues a worrisome trend, says a new C.D. Howe Institute report. In “Healthcare Spending Decelerating? Not so Fast!,” author William B.P. Robson warns that initial estimates based on provincial budgets have typically misled Canadians into thinking healthcare spending is under better control than it actually is.

Robson notes that the Canadian Institute for Health Information’s 2015 National Health Expenditures report shows a deceleration in provincial health budgets in recent years – reassuring in light of concerns about the long-term fiscal sustainability of publicly funded healthcare in Canada. He also warns, however, that each NHEX report’s figures for its two most recent years rest mainly on budget estimates. Later revisions based on actual spending numbers typically have shown materially larger increases. In keeping with this pattern, the revised estimates for 2014 in the 2015 report show another overshoot, and an upward turn in spending growth.

The problem, Robson argues, is that government budgets have tended to underpredict spending including on healthcare, making the early numbers in the NHEX unreliable guides to what will actually happen. It is not enough for governments to predict slower growth in healthcare spending, he says, achieving long-term sustainability requires them to do a better job hitting those targets.

Part of the explanation for health spending overshoots seems to be positive revenue “surprises” that undermine fiscal discipline: when governments reap more revenue than they budgeted for, they spend more than they budgeted for. More realistic revenue projections and better scrutiny of in-year spending decisions could help hold healthcare spending increases in line with Canadians’ willingness to pay.

Robson concludes: “All Canadians, as users of publicly funded healthcare, as healthcare providers, as taxpayers and as citizens, have an interest in the fiscal sustainability of the healthcare system. Ensuring that provincial and territorial governments hit their healthcare spending targets is critical to that sustainability.”

Click here for the full report.

The C.D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies. Widely considered to be Canada’s most influential think tank, the Institute is a trusted source of essential policy intelligence, distinguished by research that is nonpartisan, evidence-based and subject to definitive expert review.

For more information contact: William B.P. Robson, President and CEO, C.D. Howe Institute: 416-865-1904, or email: kmurphy@cdhowe.org.

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