Total Canadian Health Expenditure to Reach US$130 bil. in 2006, CIHI Report Says

The CIHI, a non-profit organisation that provides data and analysis on Canada's healthcare system, yesterday (5 December) released its tenth annual report on health expenditure trends in the country. This weighty report, which delves into many aspects of Canada's healthcare expenditure, shows that in 2006 healthcare expenditure in Canada is set to reach C$148 billion in current dollars (US$130 billion), a 5.8% year-on-year (y/y) rise over the Institute's adjusted figure for 2005. The lion's share of this figure is accounted for by public-sector expenditure which is expected to reach C$104.0 billion in 2006, with the remaining C$44.0 billion provided by private-sector spending. After adjustments for inflation, real growth is expected at around 3.7% in 2006, a continuation of a general, downward trend—excluding 2001—observed in the country since 1998. As a result CIHI President Graham Scott noted that while these data represent the tenth consecutive year in which healthcare expenditure has risen, it does now appear that spending is growing slightly slower. He added that the rising trend in total health expenditure observed since 1997 appears largely due to new public money flowing into the system from federal/provincial accords. This significant government reinvestment was forced after a crisis over the future of Canada's publicly funded healthcare system was precipitated following a period of fiscal restraint during the mid-1990s. Yet any residual fears that past budget cuts have been driving Canada down a path towards a two-tiered healthcare system appear unfounded, according to the CIHI statistics, as the ratio of public-to-private spending has remained relatively stable at around 70% to 30% over the last decade.

Hospitals, Drugs and Physicians Account for 60% of total health Expenditure

Spending on hospitals continues to represent the largest overall single component of expenditure. However, the contribution that this sector makes to total spending has declined considerably since the mid-1970s, when hospitals accounted for around 45% of the country's total expenditure. In 2006, the CIHI estimates that hospitals will account for around 29.8% of total health expenditure, and puts this steadily declining trend in hospital spending down to measures introduced in a bid to reduce the number of hospitals and beds. More importantly, these declines reflect medical and care advances that have allowed these reductions to take place.

Over the same period, retail spending on prescribed and non-prescribed drugs has soared. In 2006, spending on drugs is forecast to have risen to C$25.2 billion, or 17.0% of total health expenditure. In percentage terms this represents a significantly increased proportion of the total healthcare spend allocated for drugs, from a low of 8.4% in the late 1970s. Of particular interest, however, is how the sources of funds for prescription drugs have changed over the last 30 years. Back in 1976, the private sector accounted for around 75.6% of total expenditure. This figure is predicted to slip to 53.5% in 2006 as the public purse takes over an increasing share of the responsibility for paying for prescription drugs. This huge change in who is paying for prescription drugs is a strong recognition of the increasingly important contribution that prescription drugs are making to Canada's healthcare system.

Meanwhile, physician services constitute the third-largest component of Canada's healthcare expenditure. The CIHI estimates that spending in this category will reach C$19.4 billion in 2006, or around 13.1% of the country's total healthcare expenditure. This is still a little way short of the 1987 peak proportion of the total healthcare spend held by this category, when it accounted for approximately 15.7% of total healthcare expenditure. This shows that the country has had some success in exerting considerable downwards pressure on spending in this particular sector.

Healthcare Expenditure Greatest for Very Young and Elderly

The CIHI report coverers a wide series of macro-level health expenditure statistics at a Provincial/Territorial, countrywide and even international level. One specific finding of the study is that per capita spending is greatest for Canadians under the age of one and those aged 65 or older. Per capita spending by provincial and territorial governments on these two groups stood at C$7,565 per person and C$8,969 per person, respectively. These figures are considerably higher than the per capita spending on the remainder of the population, which for both sexes stood at well below C$2,000 per person. Notably, in an international comparison Canada's per capita spending on healthcare is only around 50% of that of the United States. While this finding is in keeping with conventional wisdom, it is also interesting to note that the CIHI figures show that Canadians aged 65 and older accounted for around 44% of total provincial and territorial government health expenditure, a proportion that has not changed significantly since 1998, the institute explains.

(For full details see National Health Expenditure Trends 1975-2006)

Outlook and Implications

With the total sum spent on drugs continuing to accelerate at above the rate of overall healthcare expenditure growth, and the public's share of that expenditure continuing to rise, and it is interesting that the proportion of total provincial and territorial government healthcare spending accounted for by Canadians aged 65 years and older has not risen significantly between 1998-2004. This is partly a reflection of the impact Canada's baby-boomers are yet to have on the country's health expenditure, which is not expected to happen in earnest until after the end of this decade; however, this also suggests that, given that the elderly use a disproportionate amount of prescription drugs, drug expenditures are not putting the strain on provincial budgets that governments may suggest. In practical terms, increased spending by the provinces and territories on prescription drugs, which are above the level of rises in total healthcare expenditure, are being mitigated by a reduction in spending on other categories of healthcare expenditure. This, some may argue, is a demonstration of the benefit that prescription drugs are having on Canada's healthcare economy. However, in the long term the situation in which the proportion of the total healthcare expenditure accounted for by elderly patients remains relatively static is unlikely to continue; the CIHI estimates that while the proportion of the Canadian population above 65 years of age currently stood at around 13% in 2004, this is figure projected to rise over the next 25 years to reach 23% by 2031.