Health care spending in Canada to exceed $180 billion this year: CIHI

With economic decline, health expenditure as a proportion of GDP grows to all-time high of 11.9%

November 19, 2009 – Health care spending in Canada is expected to reach $183.1 billion in 2009, an estimated increase of $9.5 billion, or 5.5%, since 2008, according to new figures released today by the Canadian Institute for Health Information (CIHI). This represents a forecast increase of $241 per Canadian, bringing total health expenditure per capita to an estimated $5,452 this year. The figures are included in CIHI’s report, National Health Expenditure Trends, 1975 to 2009, Canada’s most comprehensive source of information tracking how dollars are spent on health care in this country.

The combination of a slowdown in the economy and a continued increase in health care spending resulted in a jump in the proportion of health care expenditure from 10.8% of Canada’s gross domestic product (GDP) in 2008 to an estimated 11.9% in 2009.

“Continued spending on health care during a recession is not surprising. People still need health care, even when the economy slows down,” explains Graham W. S. Scott, Chair of CIHI’s Board of Directors. “We have seen a contraction in the Canadian economy in 2009. The spike in health care spending as a share of our economy is similar to spikes in past recessionary periods. This situation is not unique to Canada. The U.S. is forecasting a similar rise in health spending, with the health-to-GDP ratio expected to reach 17.6% in 2009.”

CIHI’s report shows that, after adjusting for inflation and population growth, spending on health care this year is expected to grow by 2.5%. This is lower than the estimated growth rate for 2008 (4.2%).

Spending on physicians grows faster than spending on hospitals or drugs

Hospitals continue to account for the largest component of Canada’s health care spending; however, their share of total health expenditure steadily declined over the past three decades.

In 2009, hospitals are expected to account for 27.8% ($51.0 billion) of total health care spending, down from 44.7% in 1975.

In 2009, spending on drugs (including both prescribed and non-prescribed medications) is expected to make up the second-largest proportion of health dollars, accounting for an estimated 16.4% ($30.0 billion) of the total. This share nearly doubled over the past 30 years and has remained stable since 2007 (16.5% in 2007 and estimated 16.4% in 2008). Payments to physicians represent Canada’s third-largest share of health expenditure, accounting for an estimated 14.0% of total spending in 2009 ($25.6 billion), a share that has remained relatively stable since 1998.

Spending on physicians is expected to grow at an estimated annual growth rate of 8.8% this year. This is higher than the forecast growth rates for hospitals and drugs, which are each estimated to grow by 5.1%.

Public- and private-sector spending shares remain stable

Since 1997, the public- and private-sector shares of total health expenditure have remained relatively stable, with governments accounting for 70% of total spending and the private sector (including privately insured and out-of-pocket expenses) for 30%. In 2009, public-sector health care spending is expected to reach $128.6 billion (70.2% of total spending), compared to $54.5 billion spent by the private sector (29.8% of total spending).

As in past years, prescribed drugs and dental care account for the largest shares of private health care spending, while hospitals and physicians represent the largest shares for the public sector.

In 2007, the latest year of available data, out-of-pocket expenses by individual Canadians represented 15% of total health expenditure, or $23.4 billion. Private insurance accounted for 12%, or $19.5 billion.

Health spending continues to vary by province, age

In 2009, total health care spending per person is expected to be highest in Alberta and Newfoundland and Labrador, reaching an estimated $6,072 and $5,970, respectively. Quebec and British Columbia are forecast to have the lowest expenditure per capita at $4,891 and $5,254, respectively.

“Provincial variations occur since each province operates within its own unique environment to meet the needs of its population,” says Anne McFarlane, Interim President and CEO of CIHI. “Health system spending may be affected by such things as geographic distribution, the models of care, salary and benefit levels and age structure of the province’s population.”

In 2007, the latest available year for data broken down by age group, health care spending by provincial and territorial governments was highest for seniors age 65 and older ($10,318 average per person) and infants younger than 1 ($8,239). In contrast, health care spending on Canadians between age 1 and 64 averaged $1,966 per person, up from $1,832 in the previous year.

There were great variations among seniors: for those age 65 to 69, the average per capita spending was $5,589. For those age 80 and older, per person spending reached more than three times that amount ($17,469).

International comparisons

In 2007, the latest year for which data is available, among 26 countries with similar accounting systems in the Organisation for Economic Co-operation and Development (OECD), per capita spending on health care remained highest in the United States (US$7,290). The U.S. was followed by Norway (US$4,763), Switzerland (US$4,417) and Luxembourg (US$4,162). At around US$3,895 per capita, health care spending in Canada was similar to six other OECD countries, including the Netherlands, Austria, France and Germany.

National Health Expenditure Database

The data released today is from CIHI’s latest report, National Health Expenditure Trends, 1975 to 2009, which provides an overview of health care spending trends from 1975 to 2007, as well as forecasts for 2008 and 2009. 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 to 2009 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 health.