Health care could eat up half of provincial budgets by 2030

By Andrew Rickard | June 03 2016 09:50AM

A recent report from The Fraser Institute suggests that health care costs could account for half of provincial spending by 2030.

In The Sustainability of Health Care Spending in Canada, authors Bacchus Barua, Milagros Palacios, and Joel Emes consider trends in health care spending. They note that health care is already the single largest budget item for every province in Canada, and warn that further increases will have a significant effect on government’s ability to fund other programs such as education and social services.

A grim picture

The report presents two models for projecting health care spending costs; one scenario relies on inflationary and demographic trends observed from 1998 and 2013 while the second uses information collected from the shorter and more recent period between 2008 and 2013. Both models paint a grim picture of future health costs.

The first model predicts that, on average, the proportion of provincial budgets dedicated to health care spending will increase from 40.6% in 2015 to 47.6% by 2030 and indicates that five provinces (PEI, Nova Scotia, New Brunswick, Ontario, and British Columbia) will see that amount grow close to or even exceed 50% 2030. The second scenario is slightly better, but average health care spending is still forecast to increase to 45.3% percent by 2030.

Canada’s aging population

Much of this increase is due to Canada’s aging population. The percentage of people over the age 65 is expected to increase from 16.5% in 2016 to 22.8% by 2030, and the authors point out that older Canadians consume more health care dollars than middle-aged and younger Canadians: in 2013 those over the age of 65 consumed 45% percent of all health care expenditures.

In the end, both scenarios predict that the current ratio of health program spending to GDP will increase. The authors believe this will necessitate changes in other policies, either reductions in other spending to accommodate the increases in health care spending, or higher taxation, higher deficits and debt, or some combination of these three.

"Simply put, the current health care 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," concludes the report.