Health care spending to reach $142 billion this year

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Ratio of health expenditure to GDP hits all-time high at 10.4%

December 7, 2005-Canada’s health care spending is expected to reach $142.0 billion in 2005, a 7.7% increase over last year. This represents a real increase of 5.0%, after the numbers are adjusted to account for inflation. These figures were released today in the Canadian Institute for Health Information (CIHI) annual report on health care spending in Canada, National Health Expenditure Trends 1975–2005.

The new estimates also show that health care spending continues to increase as a share of Canada’s gross domestic product (GDP). In 1975, health care spending accounted for 7.0% of the GDP. That proportion grew to 10.0% by 1992, declined gradually to 8.9% in 1996 and then rose again, reaching an estimated 10.2% in 2004. CIHI projects it will climb again to an estimated 10.4% in 2005, its highest share ever.

“Over the course of the last several years, health care spending has been growing faster than our economy,” says CIHI President and CEO Glenda Yeates. “This year’s increase may be due, in part, to money dedicated in the last several health accords that is starting to flow into the system.”

Continuing the general trend of the last several years, private-sector spending in 2005 continues to grow at a faster rate than public-sector spending. CIHI forecasts private-sector health care spending will increase 8.7% over last year, compared to an estimated 7.3% increase in public-sector spending. The public and private shares of total health care spending have remained fairly steady over the last five years. CIHI estimates the public share will account for 69.6% of total health care spending in 2005, compared to 70.0% in 2001 and 69.6% in 2002.

Public-sector spending is expected to reach $98.8 billion by the end of the year, up from $74.7 billion five years ago in 2001, with a majority of spending going toward hospitals and physicians. CIHI estimates private-sector health care spending (mostly insurance and out-of-pocket expenditures) will reach $43.2 billion this year, up from $32.0 billion five years ago, with more than half of private-sector health care dollars expected to go toward drugs and dentistry.

New data on public health

For the first time, CIHI’s report on health care spending identifies how much is being spent on public health. Formerly calculated under a combined category, which included prevention and health promotion programs, as well as certain types of administration, public health is now being reported independently.

“Separating these categories makes these data substantially more useful to the people running Canada’s health system,” says Geoff Ballinger, CIHI Manager, Health Expenditures. “Knowing what we’re spending on public health can help guide sound health care management and policy decisions in this area.”

According to the new data, spending on public health is expected to reach $7.8 billion in 2005. Canada spent $406.8 million in this area in 1975, $1.5 billion in 1985 and $3.3 billion in 1995.

Spending on hospitals, drugs and physicians

Hospitals continue to make up the largest component of health care spending, accounting for close to 30% of total health expenditure. CIHI estimates that Canada will spend $42.4 billion on hospitals in 2005-that’s up 6.4% from last year-compared to $32.5 billion five years ago.

Drug expenditure is the fastest-growing category of health spending, up 11.0% from last year and continuing to increase more rapidly than overall health expenditure. Drug spending (prescribed and non-prescribed drugs) makes up the second-largest proportion of health dollars, at almost 18% of the health care budget. CIHI forecasts total drug expenditure will reach $24.8 billion in 2005, compared to $16.7 billion five years ago. Prescribed drugs make up 83% of drug spending and are the fastest-growing component.

Physician spending accounts for the third-largest category of total health care spending. CIHI forecasts Canada will spend $18.2 billion in this area in 2005, up 6.4% from 2004 and compared to $14.0 billion five years ago in 2001.

Spending on institutions other than hospitals (including nursing homes and other residential care facilities) accounted for the fifth-largest health care spending category in 2005. CIHI forecasts that spending on these institutions will reach $13.3 billion this year-up 7.8% from 2004-compared to 10.1 billion five years ago.

Per capita spending-provincial and territorial comparisons

Another way this report looks at health care spending in Canada is by showing what is spent per person. For 2005, CIHI expects per capita spending to reach $4,411, an increase of 6.9% over 2004. To compare this number more accurately to what was spent in the past, it is necessary to adjust for inflation, which brings the per capita spending increase to 4.2%. This is up slightly from the 4.0% increase estimated for last year, and is less than the increase of 5.6% five years ago in 2001.

There is significant variation across the provinces and territories when it comes to how much is spent on health care per person. The amount is much higher in the Yukon Territory, the Northwest Territories and Nunavut because of the higher costs of serving relatively small populations scattered across large areas. Among the provinces, CIHI forecasts that the three highest per capita spenders in 2005 (measured in current dollars-not adjusted for inflation) will be Alberta ($4,820), followed by Manitoba ($4,790) and Ontario ($4,595). The lowest expenditure per capita will be in Quebec ($3,878), Prince Edward Island ($4,132) and British Columbia ($4,317).

International comparisons

Just as there is variation in per capita health care spending across Canada, there is considerable variation among countries. In this report, CIHI compares Canada’s health care spending to Organisation for Economic Co-operation and Development (OECD) countries with similar accounting systems. Of the 16 countries in this category, the United States spent the most per capita ($5,635) in 2003, the latest year for which data are available. Norway, Switzerland and Canada followed with per capita spending of $3,807, $3,781 and $3,001, respectively. Turkey spent the least per capita on health care ($513), just below Mexico ($583). Per capita spending is measured in U.S. dollars.

National Health Expenditure Database

The data released today are from CIHI’s latest report, National Health Expenditure Trends, 1975-2005, which provides an overview of health care spending trends from 1975 to 2003, as well as forecasts for 2004 and 2005. The report draws upon data compiled from CIHI’s National Health Expenditure Database, Canada’s most comprehensive source of information on health care financing and spending. Where appropriate, National Health Expenditure Trends, 1975-2005 provides data in both current and constant dollars. Current dollars measure actual expenditure in a given year. Constant dollars remove the effects of inflation to measure expenditure based on price levels prevailing in a base year. In this release, the term “constant dollars” refers to amounts in 1997 prices. Real growth rates measure annual changes of data reported in constant dollars.

About CIHI

The Canadian Institute for Health Information (CIHI) collects and analyzes information on health and health care in Canada and makes it publicly available. Canada’s federal, provincial and territorial governments created CIHI as a not-for-profit, independent organization dedicated to forging a common approach to Canadian health information. CIHI’s goal: to provide timely, accurate and comparable information. CIHI’s data and reports inform health policies, support the effective delivery of health services and raise awareness among Canadians of the factors that contribute to good health. www.cihi.ca

List of Tables

Table A.1 Total Health Expenditure, Canada, 1975 to 2005-Summary

Table A.2.1 Total Health Expenditure by Source of Finance, Canada, 1975 to 2005-Current Dollars

Table A.2.2 Total Health Expenditure by Source of Finance, Canada, 1975 to 2005-Current Dollars (%)

Table B.1.1 Total Health Expenditure, by Province/Territory and Canada, 1975 to 2005-Current Dollars

Table B.1.2 Total Health Expenditure, by Province/Territory and Canada, 1975 to 2005-Current Dollars (per Capita)

Table B.1.3 Health Expenditure as a Percent of (Provincial/Territoral) GDP, by Province/Territory and Canada, 1975 to 2005-Current Dollars

Table C.1.1 Total Health Expenditure, by Use of Funds, Canada, 1975 to 2005-Current Dollars

Table C.1.2 Total Health Expenditure, by Use of Funds, Canada, 1975 to 2005-Current Dollars (%)

Table C.2.1 Private-Sector Health Expenditure, by Use of Funds, Canada, 1975 to 2005-Current Dollars

Table C.3.1 Public-Sector Health Expenditure, by Use of Funds, Canada, 1975 to 2005-Current Dollars

Report

Information about: National Health Expenditure Trends, 1975-2005

Fact Sheet (PDF) 80 KB