Health care costs set to rise rapidly: C.D. Howe

Solutions could include increased taxes, individual payments
|hrreporter.com|Last Updated: 04/11/2011

The amount Canadians spend on health care is set to rise rapidly over the next two decades, according to a study by the C.D. Howe Institute

Chronic Healthcare Spending Disease: A Macro Diagnosis and Prognosis examines the trajectory of total health-care spending —public and private — in Canada and the policy choices Canadians must make in response.

The authors estimate the extent to which health-care spending is going to absorb a greater fraction of income than Canadians have experienced to date under two scenarios: a baseline scenario drawn from historical experience and an optimistic scenario, which assumes an unprecedented improvement in the efficiency and effectiveness of the health care system and large improvement in potential economic growth.

The baseline scenario expects health-care spending to rise from 12 per cent of gross domestic product (GDP) in 2009 to 19 per cent in 2031. The annual increase in nominal health-care spending per capita would rise from about $250 in the last decade to $675 in the 2020s. This would raise the total annual spending per capita after inflation from $4,900 per head in 2009 to $10,700 in 2031.

In the optimistic case, even with new policies and cost-reducing technologies to bring down the cost of health care, the rise in spending is still significant because it would bring the spending ratio to over 15 per cent of GDP by 2031, found the study.

Canadians must choose some combination of a sharp reduction in public services, other than health care; increased taxes to finance the public share of health-care spending; increased individual spending on health care services currently insured by provinces through some form of co-payment or through delisting of services that are currently publicly financed; or a degradation of publicly insured health care standards — longer queues and poorer quality services, found the study.

"None of them are very easy... the reason we did this (study) is because unless we get on with thinking about it and beginning to make those decisions, then we're going to run into real trouble," said David Dodge, co-author of the study.

Health care in Canada is delivered through a publicly funded system, which covers all medically necessary hospital and physician care and curbs the role of private medicine.

Health-care spending has been rising about six per cent per year under a deal that added $41.3 billion of federal funding over 10 years. But the deal between the federal and provincial governments expires in 2014 and Ottawa is unlikely to be as generous in the future as it deals with slower growth.

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