Health spending in Canada grew by only 2.6% this year, according to the Canada Institute for Health Information (CIHI). That’s a far cry from the 7% annual spending increases between 2000 and 2010.
This is the fifth straight decline in the growth rate and the third year that per capita health spending has dropped in real terms. As a percent of GDP, Canada spends 11.2% today, down from a high of 11.6% three years ago. It’s fair to say that health care spending in Canada has essentially flat-lined since the economic downturn of 2008-09.
This all happened despite the almost universal belief among opinion leaders that health spending is out of control and will bankrupt provincial governments. Opinion pages were littered with experts convinced that Canada was doomed to crippling increases in health care spending as the population aged.
Depending on the particular political preference of those making the claims, Canada either had to privatize the system, raise taxes to cover ballooning spending, or “have an adult conversation with Canadians about facing reality”. Those of us who suggested that sensible, practical reforms were possible within the current model were dismissed as denying reality.
So, now we know the “doomsday consensus” was wrong. What happened?
Well, looking at the most successful province, Ontario, the numbers are striking. For three years in a row, health care spending has increased by about 2% each year, less than the growth rate of the economy. As a percentage of GDP, Ontario is spending 6/10 of a percentage point less on health care than three years ago.
Quietly and effectively, Ontario policymakers have tackled each of the major cost areas within the system. For example, spending growth rates for hospitals, for physicians, and for drugs are down dramatically due to structural reforms in the system.
In reality governments were paying more than they necessary for health care during much of the past decade and growth was unreasonable. New technology investments produced real improvements in health care, but governments had not recouped the resulting productivity gains. So, while many procedures were now easier and quicker to perform, prices had not come down.
The “true costs” of providing many health care services have been going down for a long time, but only recently did governments apply more disciplined pricing. We’re starting to see spending fall more in line with underlying costs.
Government reforms brought down the cost of generic drugs, the 2012 agreement with the Ontario Medical Association has had a real impact in slowing the growth of physician salaries, and Ontario hospitals have shown real leadership, encouraging the government to invest funds in community care and to introduce pricing reforms..
Most importantly, while spending has come down, Ontario appears to have maintained timely access to care. Surgical wait times declined by about 8% this year and Ontario now has the lowest wait times in the country. CIHI reports that the standardized mortality rate in hospitals has dropped by 11% over the last three reported years in Ontario. There is little evidence that access or quality has suffered over the past four years as we have wrestled real growth in spending close to zero.
But more needs to be done. We need to continue to explore different ways to compensate physicians. We need to continue to move patients more quickly from acute care in hospitals into community care. We need to expand telemedicine and electronic and mobile health technologies. We need to adopt more evidence-based practices known to improve patient outcomes. We need to continue to revisit difficult questions about end of life care. We can do all of this.
The reforms of the past few years are not complete. They are a work in progress. If we continue to drive health care reforms across the system, we’ll realize more savings. We can expect several more years of low or no growth in health care spending which will allow fiscal room for other investments
We were told we’d go broke as spending rose 6-7% every year and baby boomers gobbled up services. Well, data released last week suggest that the doomsday consensus was wrong. Let’s give credit to the reformers who have been making progress to improve our system – and continue to support their efforts.
Matthew Mendelsohn and Will Falk co-authored the 2011 report: Fiscal Sustainability and the Transformation of Canada’s Healthcare System, available at www.mowatcentre.ca.