Can Canada afford its healthcare? This is a question that has been frequently asked in the last several years—and it will undoubtedly be asked time and time again in the months and years ahead.
With new cost pressures and an aging population, there are many factors at play that will challenge Canada’s ability to fund healthcare into the future. However the answer to the affordability question is not a simple yes or no. In fact, “Can we afford it” may not even be the right question.
Let’s start by looking at some basic facts regarding the cost of Canada’s healthcare system.
• In 2011, Canada spent approximately $200 billion on healthcare, or 11.6% of gross domestic product, according to the Canadian Institute for Health Information’s (CIHI) National Health Expenditure Database. On a per capita basis, this translates to approximately $4,363 (based on 2009 spending figures). The Organisation for Economic Co-operation and Development (OECD) reported in its 2011 Health Data (June Edition) that, relative to other OECD countries, Canada has the sixth most expensive healthcare system, with the U.S. having by far the most expensive healthcare system.
• The cost of healthcare is shared approximately 70/30 between the public and private sectors. This split has remained fairly consistent since the mid-1990s, contrary to popular perception that there has been significant off-loading of costs from the public to private sector. There have been some examples of government off-loading, but in absolute terms, there has not been much.
• Healthcare spending represents the largest single provincial expenditure, consuming on average 39.3% of provincial budgets, according to CIHI’s National Health Expenditure Database. There is considerable variation between provinces, with many projecting healthcare spending will soon represent more than 50% of total provincial budget expenditures.
• From 1998 to 2008, provincial revenues increased on average by approximately 1.4%. By contrast, public healthcare spending increased by 3.4%—significantly higher than spending increases in other areas such as education, infrastructure and social programs, reports Statistics Canada’s Financial Management System, 2010. This spending growth imbalance (relative to revenue growth) was made possible by reduced provincial debt loads in the early part of the decade and, therefore, lower debt servicing costs. In recent years, provincial debt loads have been increasing as we attempt to spend our way out of the economic crisis that hit much of Canada.
• Population aging has not contributed significantly to the cost of healthcare. According to CIHI’s National Health Expenditure Database, from 1998 to 2008, aging demographics represented only 1% of the increase in public sector healthcare costs. And despite the aging population, the impact of these demographic changes is expected to be relatively modest over the next decade.
• There are new pressures that will impact healthcare costs more than aging. The rates of chronic disease in Canada are staggering—and unlikely to improve in the foreseeable future. New treatment options such as biologic drugs deliver potentially superior outcomes for health, but at a significant financial cost. And access to healthcare remains a significant issue; one in six Canadians are reporting difficulty in finding a family doctor, and average wait times to see a specialist and receive treatment exceed what most medical practitioners deem to be medically appropriate, reports the Canadian Health Institute for Health Information. Further investments in medical facilities and practitioners will undoubtedly be required to deliver on the needs, wants and expectations of Canadians.
So, can Canada afford its healthcare commitments? The answer really is “it depends.” In depends on future economic growth and our collective ability to invest more into healthcare. It depends on governments’ ability and/or willingness to continue to “over-invest” in healthcare relative to spending on other worthy social programs. It depends on our collective vision for healthcare and whether both the public and private sectors are prepared to invest in order to achieve this vision. And it depends on our own individual accountability for personal health—making better lifestyle choices could have a significant impact on the future consumption of health services and, therefore, costs.
On the whole, I think Canada will be able to afford its healthcare commitments, although the answer may be somewhat different depending on the province. Recent changes to the federal funding formula are creating considerable angst at the provincial level. And some provinces are simply in a better position than others to afford healthcare. Still, over the years, governments have been able to navigate the financial tightrope and invest in the areas of most need. Even at 50% of total provincial budget expenditures, there is arguably room to spend more on healthcare.
I think the better question is, “Can Canada afford not to meet its healthcare commitments?” If you put it in these terms, I think the answer becomes clear. Most Canadians are intensely proud of our healthcare system. It would be political suicide for any government to not maintain an unyielding commitment to it. Increasingly difficult choices may need to be made to preserve its affordability, but there is little question that Canada’s healthcare system will survive into the future. As with any public policy, our commitments to healthcare must evolve and change to address both the economic realities of the day and the collective will of the Canadian people. Let’s face it, healthcare in Canada is not just public policy—it is a proud symbol of Canadian culture and identity. Failure is simply not an option.