If you think healthcare costs are high already, the next two decades are likely to come as a shock, as aging boomers stretch the system to its limits.
New research out of the C.D. Howe Institute by former Bank of Canada governor David Dodge and Richard Dion, a former economist at the Bank of Canada, find private and public spending on healthcare constitute a “spending disease.”
The base case scenario predicts healthcare costs will rise from 12% of GDP in 2009, to 19% in 2031. Even the authors’ optimistic case expects cost reducing policy and technology will take healthcare to 15% of GDP.
The baseline scenario is based on historical spending increases, and would see the annual increase in nominal healthcare spending per capita is set to rise from about $250 per year in the last decade, to $675 per year in the 2020s. If inflation is factored in, the total annual increase would rise from $4,900 per head in 2009 to $10,700 in 2031.
To stave off these skyrocketing prices, Dodge and Dion recommend policymakers adopt some combination of the following:
1) a sharp reduction in public services, other than healthcare;
2) increased taxes to finance the public share of healthcare spending;
3) increased individual spending on healthcare services currently insured by provinces, through some form of co-payment or through delisting of services that are currently publicly financed; or
4) a degradation of publicly insured healthcare standards—longer queues, and services of poorer quality.