Health care spending to reach $160 billion this year: CIHI

Ratio of health expenditure to GDP expected to climb to 10.6%

November 13, 2007 – Canada’s health care spending continues to rise and is expected to reach $160.1 billion dollars in 2007, up from $150.3 billion in 2006. This represents a forecasted annual increase of 6.6% (3.2% after taking inflation and population growth into account), according to new figures released today by the Canadian Institute for Health Information (CIHI) in its annual report on health care spending. The report, National Health Expenditure Trends, 1975–2007, is Canada’s most comprehensive source of information tracking how dollars are spent on health care in this country.

CIHI’s report shows that health care spending as a share of Canada’s gross domestic product (GDP) increased slowly but steadily over five years and is expected to reach 10.6% in 2007. This surpasses last year’s estimate of 10.4%.

“Health care spending continues to grow faster than our economy. This is the eleventh consecutive year in which health care spending is expected to outpace inflation and population growth,” says Graham W. S. Scott, C.M., Q.C., chairman of CIHI’s board of directors. “This may be due, in part, to new public investments in health services resulting from federal/ provincial/territorial health accords signed in recent years. For example, we have seen recent government initiatives to increase services in wait times priority areas, investments to attract and retain health providers and an increase in spending on buildings and equipment.”

When examining how much is spent on health care per Canadian, CIHI’s report shows that in 2007, health expenditures are forecast to reach $4,867 per person, up from an estimated $4,606 in 2006 and $4,373 in 2005. CIHI’s forecasted spending increase of 3.2% in 2007 (adjusted for inflation and population growth) is in line with adjusted annual growth rates of recent years: 3.3% in 2004, 3.4% in 2005 and an estimated 3.0% in 2006.

Public versus private spending

For the eleventh consecutive year, the ratio of public-sector to private-sector spending on health care is expected to remain relatively stable. Public-sector spending is forecast to reach $113.0 billion in 2007, representing 70.6% of total health care spending, while private-sector spending (including privately insured and out-of-pocket expenses) is projected to reach $47.1 billion this year, a 29.4% share of the total. For the second consecutive year, public-sector health expenditures are expected to grow slightly faster than private-sector spending, with estimated growth rates of 6.9% and 5.7%, respectively, in 2007.

Provincial and territorial government health spending to surpass $100 billion

When looking at public-sector spending, provincial and territorial governments account for more than 90% of health care expenditures by all levels of government. Health care spending by provincial and territorial governments is expected to surpass the $100 billion mark for the first time this year ($103.8 billion), representing nearly 65% of total health care spending.

On a per person basis, health expenditures by provincial and territorial governments are projected to reach an average of $3,156 this year. Alberta and Newfoundland and Labrador are expected to have the highest health care spending per person at $3,695 and $3,637, respectively. Quebec ($2,853) and Prince Edward Island ($3,010) are projected to have the lowest provincial government health care spending per capita.

“There are many factors that can account for these variations,” says Glenda Yeates, CIHI’s president and CEO. “For example, the age, health needs and distribution of a province’s population can influence what a government spends on health care. So can the mix and number of health professionals available to provide the care, the level of their salaries and fees, as well as differences in the way health services are delivered.”

Spending on hospitals, drugs and physicians

Hospitals continue to make up the largest component of Canada’s health care spending. In 2007, hospitals are expected to account for 28.4% of total health care spending ($45.5 billion), down from 31.5% in 1997 and 44.7% in 1975.

Since 1997, drugs have consumed the second-largest share of health dollars. In 2007, spending on drugs (including both prescribed and non-prescribed medications) is expected to account for 16.8% of health care spending ($26.9 billion), up from 14.5% a decade ago and 8.8% in 1975. Physicians represent Canada’s third-largest share of health expenditure, accounting for an estimated 13.4% of total spending in 2007 ($21.5 billion), a share that has remained relatively stable since 2000. This year, however, spending on physicians is expected to grow slightly faster (8.5%) than spending on drugs (7.2%) and hospitals (5.6%).

Spending highest on infants and seniors

In 2005, the latest year available for age-specific data, per capita health care spending by provincial and territorial governments was highest for infants under the age of 1 ($7,437) and people 65 years of age and older ($9,502). In contrast, health care spending on Canadians between the ages of 1 and 64 averaged an estimated $1,735 per person.

Among seniors, there is also great variation. For those aged 65 to 69, the average per capita spending was $5,142 in 2005. For those aged 85 to 89, per person spending reached $20,731.

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 2005, 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%.

International comparisons

Among 23 countries with similar accounting systems in the Organisation for Economic Co-operation and Development (OECD) in 2005, the last year for which data are available, spending per person on health care remained highest in the United States (U.S.$6,401). The U.S. was followed by Norway ($4,364), Switzerland ($4,177) and Austria ($3,519). The lowest per capita expenditures were seen in Turkey ($586) and Mexico ($675). Health care spending in Canada (U.S.$3,326 per person) was relatively similar in range to seven other OECD countries, including France, Germany, the Netherlands and Australia.

National Health Expenditure Database

The data released today are from CIHI’s latest report, National Health Expenditure Trends, 1975–2007, which provides an overview of health care spending trends from 1975 to 2005, as well as forecasts for 2006 and 2007. The report draws upon data compiled from CIHI’s National Health Expenditure Database, Canada’s most comprehensive source of information on health care spending. Where appropriate, National Health Expenditure Trends, 1975–2007 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 report, 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