Assessing the Impact of Some Health Care Cost Drivers in Canada During the Last Decade
17 Pages Posted: 1 Mar 2015 Last revised: 4 Mar 2015
Date Written: June 3, 2011
Public spending on health in Canada has reach $121 billion in 2008; an average annual increase of 7.4% compared to the 1998 level. For the same period, total government revenue has grown at an average annual rate of 5.2%. This fact has led some stakeholders to conclude that health spending is unsustainable. It has also kindled interest of policy makers in understanding current cost drivers of health expenditures in Canada, namely within the context of the imminent end of the 2004 Health Ministers Accord and future discussions regarding renewal of Federal/Provincial/Territorial (F/P/T) funding of health care. The objective of this study is to better understand the impact of some health care cost drivers over the last ten years in Canada. These key questions are addressed: To what extent did aging and other factors such as technology drive health care costs over the last ten years? How did growth in public sector health spending compare to growth in other government programs?
Using data from Public Accounts and the National Health Expenditures (NHEX) database, we found that, even in a decade where the health sector has benefited from substantial funding, it did not prevent growth from happening in most of the other sectors, such as transport and education. Aging accounted for less than 1.0% of the growth in public sector health spending. Other factors that impact health spending growth include: fiscal position, health-specific inflation and technological change, with the latter being possibly one of the most important components.
Keywords: Health Spending, Cost Drivers, Canada
JEL Classification: I10, I18, J11
Suggested Citation: Suggested Citation