Healthcare

Healthcare spending in Canada – is it sustainable?

Max Parkinson

Max Parkinson

Healthcare continues to be the single largest budget item for every province in Canada. This ranges from 34.5 percent of Quebec’s total program spending to 44.6 percent in Nova Scotia. Therefore, any spending changes can have a significant impact on a government’s fiscal balance (deficits or surpluses), and limits the available resources for other programs such as education, social services and tax competitiveness (Fraser Institute, 2016).

 

The Fraser Institute paper Sustainability of Healthcare Spending in Canada presents two scenarios for projecting future healthcare spending based on several factors:

  • demographic factors (population growth and aging)
  • inflation (general and health-specific inflation)
  • other influences such as government policy, income elasticity, technology developments, etc.

 

Scenario one: standard model
Assumptions Reasonable future expectation of general inflation, demographic trends, health-specific inflation and other factors observed between 1998-2013.
Healthcare spending projections To grow at about 6.3 percent per annum on average (2015-2030).
Results Healthcare spending is expected to consume an increasing portion of total program spending—growing from 40.6 percent in 2015 to 47.6 percent in 2030. The range of results for specific provinces is as low as 36.6 percent in Quebec and as high as 54.2 percent in Prince Edward Island (PEI) in 2030. Indeed, the calculated projections indicate that five provinces (PEI, Nova Scotia, New Brunswick, Ontario and British Columbia) will see healthcare spending grow close to (or exceed) 50 percent of total program spending by 2030. Plus, total health spending is expected to grow from 7.3 percent of the economy in 2015 to 10.7 percent in 2030.

 

 

Scenario two: alternative model
Assumptions Health-specific inflation and other factors altered to reflect trends between 2008-2013.
Healthcare spending projections To grow at about 4.6 percent per annum on average (2015-2030).
Results Healthcare spending is expected to consume a larger portion of total program spending—growing from 40.6 percent in 2015 to 45.3 percent in 2030. Plus, total health spending can be expected to grow from 7.3 percent of the economy in 2015 to 8.3 percent of the economy in 2030.

 

The Fraser Institute concludes that “simply put, this paper shows that the current healthcare arrangements, which result in the level of spending observed and expected, do not seem sustainable over the next 15 years from today’s vantage point.”

 

Canada’s provincial governments will need a combination of new revenue or spending cuts to get back to a sustainable budget. Healthcare systems need to be prepared for the possibility of the latter. Paper-based systems and spreadsheet software are simply not sufficient to deliver the budget development capabilities for health care systems to deal with the financial realities of the future.

 

Questica Budget is a versatile budgeting tool that provides a controlled environment for budget input, review, approval and maintenance. Questica Budget offers one point of data entry and seamless integration into an organization’s financial system. Using Questica Budget you can quickly develop and analyze different “what-if” scenarios and immediately find out the impact of each scenario.

 

Questica has been providing public sector budgeting solutions since 1998 and has been implemented by over 200 public sector customers with over $55 billion in annual budgets under management.

 

Do you want your healthcare system to be able to handle the impact of long-term provincial spending decisions? Find out how we can help – request a demo today.

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