Healthcare spending to reach $148 billion this year: CIHI

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Infants and seniors account for highest spending per capita

December 5, 2006 – Health care spending in Canada is expected to reach $148 billion in 2006, an increase of $8 billion over last year, according to figures released today by the Canadian Institute for Health Information (CIHI) in its annual report on health care spending. National Health Expenditure Trends, 1975–2006 projects that total health care spending in Canada will increase by 5.8% in 2006 over the previous year. This increase is slightly lower than the estimated annual growth rate of 6.4% in 2005, and lower than the average yearly rate of increase (7.8%) from 2000 to 2004. After adjustment is made for inflation, health expenditures in 2006 are expected to grow by 3.7% or reach $120 billion in constant 1997 dollars.

“For the tenth consecutive year, health care spending continues to outpace inflation and population growth,” says Graham W. S. Scott, C.M., Q.C., Chairman of CIHI’s Board of Directors. “This sustained period of growth may be due in part to new public money flowing into health care delivery from federal/provincial accords. However, while health care spending continues to grow, it now appears to be growing at a slightly slower rate.”

CIHI’s estimates also reveal that while health care spending as a share of Canada’s gross domestic product (GDP) is expected to stay relatively stable this year, it remains at its highest level in 31 years. Health care spending as a share of GDP is expected to reach 10.3% this year, compared to an estimated 10.2% in 2005 and in 2004. Health care spending as a proportion of GDP was at its lowest (6.8%) in 1979, climbing to a 10.0% peak in 1992, before dipping and rising again to its current high level.

Spending higher per person for younger and older Canadians

Total health care spending per capita is expected to reach $4,548 in 2006, a 4.9% increase over last year. In 2004, the latest available year for data broken down by age group, health care spending by provincial and territorial governments was highest for infants and seniors, costing an estimated $7,565 per person for Canadians under the age of 1, and $8,969 for those aged 65 and over.

“The beginning and final years of life are the times when people use health care the most,” says CIHI President and CEO Glenda Yeates. “This is a trend that has been consistent over time, and continues to be an important factor in health care spending. But the proportion we spend on seniors has remained relatively stable in the last few years.”

CIHI’s figures show that Canadians aged 65 and over accounted for an estimated 44% of total provincial and territorial government health care spending in 2004, a proportion that has not changed significantly since 1998, when national data broken down by age group first became available. Infants (under 1 year of age) account for about 3%.

Public vs. private spending

Public-sector spending on health care is expected to reach $104 billion this year, while private-sector expenditures will reach an estimated $44 billion. For the first time in three years, health care spending in the public sector is expected to grow slightly faster than expenditures in the private sector (mostly insurance and out-of-pocket expenditures), with estimated annual growth rates of 6.1% and 5.3% respectively in 2006. The public and private shares of total health care spending have remained fairly steady over the past decade. This year, the public share is expected to account for 70.3% of total health care spending, in line with the 70/30 ratio of public/private spending seen over the last ten years.

Hospitals, drugs and physicians: largest categories of spending

Hospitals continue to make up the largest component of health care spending, accounting for an estimated 29.8% of total health expenditures in 2006. Drugs, including both prescribed and non-prescribed medication, represent the second-largest share of total health care spending (17.0%), while physicians are expected to make up the third-largest share, with 13.1% of total health expenditures. Spending on hospitals is expected to increase by an estimated 4.8% over last year, while spending on drugs and physicians is projected to have annual growth rates of 6.0% and 7.1% respectively for 2006.

When it comes to public-sector health spending, hospitals account for an estimated 38.5% of all expenditures, followed by spending on physicians, representing an estimated 18.4% of public-sector spending. Drugs and dental services remain the two most significant items of private-sector spending, representing 35.3% and 21.5% respectively in estimated shares of total private-sector expenditures.

Provincial and territorial comparisons

CIHI’s report provides a provincial breakdown of total health care spending per person. In 2006, public and private health care spending in Alberta is expected to reach $4,924 per person, followed by Manitoba ($4,901) and Ontario ($4,760). The lowest per person expenditures are expected for Quebec ($3,976), followed by Prince Edward Island ($4,225) and Newfoundland and Labrador ($4,402). The spending gap between the provinces with the highest and lowest per-capita spending is projected to be 24% in 2006.

Canada still among top five health spenders in 2004

Canada continues to rank among the world’s top five health spenders when compared to other countries in the Organisation for Economic Co-operation and Development (OECD), and remains behind the United States in terms of health care spending per person. Among 21 countries with similar accounting systems, the U.S. maintained its rank as the highest per capita spender on health care (US$6,102) in 2004, the latest year for which data are available. Canada ranked fifth in per capita spending (US$3,165), after Luxembourg (US$5,089), Switzerland (US$4,077) and Norway (US$3,966). The OECD countries that spent the least per person on health care in 2004 were Turkey (US$580) followed by Mexico (US$662).

National Health Expenditure Database

The data released today are from CIHI’s latest report, National Health Expenditure Trends, 1975–2006,which provides an overview of health care spending trends from 1975 to 2004, as well as forecasts for 2005 and 2006. 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, 1975–2006 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.