Compensation of health professionals, evolution in the use of services
important cost drivers of past decade
OTTAWA, Nov. 3, 2011 /CNW/ - Total spending on health care in Canada is
expected to grow by more than $7 billion this year to reach a forecast
$200.5 billion in 2011. This amounts to roughly $5,800 per Canadian,
about $150 more per person than last year, according to a new report
released today by the Canadian Institute for Health Information (CIHI).
National Health Expenditure Trends, 1975 to 2011, one of two CIHI reports released today, shows that growth in health
care spending is slowing down. Spending is expected to increase by 4.0%
in 2011 over last year—the lowest annual growth rate seen in the last
15 years. In contrast, average annual growth in health care spending
between 1998 and 2008 was 7.4%.
While health care spending continues to rise faster than inflation and
population growth, it is expected to grow more slowly than the overall
economy this year. Spending on health care is forecast to reach 11.6%
of Canada's gross domestic product (GDP) in 2011, a slight decrease
from the historic peak of 11.9% in 2009 and 2010.
"Like in many other countries in the developed world, health care in
Canada has seen a period of tremendous growth and major reinvestments
in the new millennium," explains CIHI's President and CEO, John Wright.
"While the pace of that growth appears to be slowing down, it's
important to understand how we reached the $200-billion mark this year.
In light of global economic uncertainty and efforts here at home to
address government deficits, it's important to examine what's been
driving health care costs in order to better plan for the future of the
Main factors that drove health expenditures since 1998
CIHI is also releasing another major study today, called Health Care Cost Drivers: The Facts. The report examines the key factors that contributed to the
$200-billion milestone. It focuses on public-sector health care
spending between 1998 and 2008—a boom period when annual health
expenditure in Canada more than doubled—and identifies issues to
monitor in the future.
The study shows that in Canada, as in many countries in the Organisation
for Economic Co-operation and Development (OECD), there was a tendency
to spend more on health care during a period of economic growth and
higher income. From a fiscal policy perspective, the period from 1998
to 2008 saw a reduction in the interest that governments in Canada had
to pay on outstanding debt, which allowed them to divert resources to
overall program spending and tax reduction. The major cost drivers of
public-sector health care spending in the past decade were compensation
of health care providers, increased use of services and an evolution in
the types of services provided and used.
Compensation of health professionals a major cost driver
CIHI's data shows that compensation paid to health care providers has
been one of the most significant cost drivers of public-sector health
care spending. Hospitals represent the largest category of
public-sector spending (37%), and compensation represents about 60% of
total hospital budgets. Between 1999 and 2008, the number of hospital
workers grew by 21%, while their compensation increased faster than
that of workers in the general labour market. The hourly paid hospital
employees wage index from Statistics Canada increased by an average of
3.3% per year, compared with an average annual wage increase of 2.7% in
the general economy.
After hospitals, physicians represent the second-largest category of
public-sector health care spending (20% in 2011). Between 1998 and
2008, physician expenditures increased on average by 6.8% a year. CIHI
data shows that the price of doctors' services was the most important
cost driver of spending in this category, with compensation for
doctors' services growing by 3.6% a year—faster than that for other
health workers and the labour market in general. However, physician
compensation grew more slowly than the prices of other public goods and
services from 1975 until 1998.
"Over the last decade, a host of factors may have contributed to the
compensation hike for physicians and other health professionals,"
explains Wright. "For example, increased competition between provinces
to recruit and retain health providers, tighter credentialing of health
professionals and stronger bargaining positions due to increased
government revenues may have all played a role."
With the number of practising doctors on the rise in Canada, CIHI data
shows that spending on physicians is expected to be one of the
fastest-growing categories of health expenditure in Canada in 2011,
outpacing growth in spending on drugs and hospitals for the fifth year
in a row.
Increased use of services and evolving types of services used
Over the past decade, population growth contributed about 1% annually to
health care costs. Beyond the demographic factors, the data shows that
Canadians are using more health care in some areas. For example, the
volume of drugs sold in Canada contributed an average increase in
spending of 6.2% a year between 1998 and 2007, even after accounting
for population growth and aging. Overall drug spending grew by an
average of 10.1% per year during this period. This makes increased
utilization the single largest cost driver of drug spending over the
past decade. The increased volume was driven largely by use of
anti-hypertensive, cholesterol-lowering and gastrointestinal drugs.
Canadians are also seeing their doctors more often and getting more
medical procedures. Over the past decade, use of physician services
grew by 1.5% annually per Canadian, after adjusting for population
aging. The 10-year period also saw a significant increase in the number
of Canadians receiving priority-area procedures, such as hip and knee
replacements; diagnostic imaging exams, such as magnetic resonance
imaging (MRI) and computed tomography (CT) scans; and cataract surgery
A change in the types of health services used by Canadians—such as the
emergence of new drugs and new diagnostic and surgical tools—has also
contributed to the growth in health costs. For example, changes in the
types of drugs used were an important driver of drug spending,
particularly during the last five years. New cancer drugs and
immunosuppressants were two of the fastest-growing drug classes during
this period. Investments in technologies, such as diagnostic imaging
equipment, also grew significantly over this period. Between 1997 and
2010, the number of CT scanners operating in Canada nearly doubled
(from 245 to 484), while the number of MRI machines increased more than
fivefold (from 55 to 281).
Aging population a modest health care cost driver
CIHI also analyzed the extent to which the aging population is driving
The report demonstrates that population aging is a cost driver of modest
importance relative to other drivers, accounting for less than 1% of
average annual growth in health care spending (0.8% per year) from 1998
"There is no doubt that as we grow older, we often need more health
services and that this costs the health system more money. However,
while the Canadian population is aging, it is aging slowly as a whole,"
says Jean-Marie Berthelot, Vice President of Programs at CIHI. "Over
the past decade, the proportion of health dollars spent on seniors by
provincial and territorial governments has remained relatively stable
at 44%. This tells us that spending on seniors is not growing faster
than spending for the population at large."
CIHI data shows, however, that the impact of aging on health care
spending varies considerably by province. It is more significant in the
Atlantic provinces and Quebec, for example, than in Ontario and the
Health care spending not growing as share of provincial and territorial
Since health care delivery is a provincial/territorial responsibility in
Canada, the vast majority of public-sector health dollars are spent by
provincial and territorial governments. In 2010, the latest year of
available data, health care is estimated to account for about 38% of
provincial/territorial government spending. However, this proportion
varies among provinces, from 30.4% in Quebec and 33.9% in Newfoundland
and Labrador to 44.5% in Manitoba and 47.2% in Nova Scotia.
"Our study identifies several areas to monitor for the future in terms
of health care spending," says Berthelot. "For example, increases in
the number of health professionals, changes in their scope of practice
and the introduction of new technologies—such as new cancer biologic
drugs—may all continue to have a significant impact on what we
collectively pay for health care. Canadian governments, and society as
a whole, will need to balance the health needs of the population
against overall costs to ensure Canadians have an efficient, effective
and sustainable system."
About National Health Expenditure Trends, 1975 to 2011
This annual report provides an overview of health care spending trends
from 1975 to 2009, as well as forecasts for 2010 and 2011. The report
draws upon data compiled from CIHI's National Health Expenditure (NHEX)
Database, Canada's most comprehensive source of information on health
care spending. Where appropriate, the report 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 case, 1997). Real growth rates measure annual
changes of data reported in these constant dollars.
About Health Care Cost Drivers: The Facts.
This supplement to CIHI's annual NHEX report analyzes the areas that
drove health care spending in the public sector during the major growth
period of the last decade (1998 to 2008), as well as issues to watch in
the future. Public-sector spending represents 70% of the total health
bill, a proportion that has remained relatively stable since 1997. The
report examines factors within the three major categories of public
health expenditure—hospitals, physicians and drugs—as well as those
affecting health care spending overall.
The reports, as well as the following figures, are available on our
website at www.cihi.ca.
Total Health Expenditure, Canada, 1975 to 2011 (Figure 1 in the NHEX
Total Health Expenditure, Annual Growth Rates in Constant 1997 Dollars,
Canada, 1976 to 2011 (Figure 2 in the NHEX report)
Total Health Expenditure per Capita, Canada, 1975 to 2011 (Figure 3 in
the NHEX report)
Total Health Expenditure as a Percentage of Gross Domestic Product,
Canada, 1975 to 2011 (Figure 5 in the NHEX report)
Cost Driver Shares of Average Annual Growth in Public-Sector Health Care
Spending, 1998 to 2008 (Figure 9 in the cost drivers report)
SOURCE CANADIAN INSTITUTE FOR HEALTH INFORMATION
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