COVID pushed Canada's healthcare spending over a $300-billion cliff

by Leo Almazora08 Nov 2021

Total health spending Canada is expected to exceed $308 billion in 2021, a new annual high, following the country’s stepped-up efforts to mobilize healthcare resources against the pandemic.

In a new report that draws from data in the National Health Expenditure Database (NHEX), the Canadian Institute of Health Information (CIHI) presented finalized figures for 2019 spending on health, along with preliminary estimates for 2020 and 2021.

It said the country is expected to spend the equivalent of more than $8,019 per Canadian this year. Health expenditure will represent roughly one eighth (12.7%) of Canada’s GDP, following a high of 13.7% in 2020.

Between 2019 and 2020, the institute said, total health spending in Canada rose by 12.8% – a pace of growth not seen in more than 30 years. Before that, from 2015 until 2019, health spending grew by an average of 4% per year.

“COVID-19 resulted in the single biggest increase in health spending we have ever seen in this country,” said CIHI President and CEO David O’Toole in a statement.

The 2020 spike in health spending, it said, was due to additional funding deployed to scale up health system capacity, testing, vaccination, and other pandemic response measures. The surge in the health spending-to-GDP ratio, it added, came as measures related to containing the virus’s spread caused the GDP growth rate to drop 4.6%.

The report also noted that historically, periods of fiscal restraint are characterized by flat spending growth, which was observed from 1993 to 1996 as well as 2011 to 2014. But the marked decline in economic activity alongside the aggressive fiscal response to the pandemic in 2020 led to record highs in government deficits. As the government strives for fiscal restraint in the future, the report said, it could have a dampening effect on health spending.

Breaking down its 2021 estimates, the institute said more than 50% of total health spending projected for the year is expected to go to hospitals (25%), drugs (14%), and physicians (13%), which account for the largest shares of health dollars. Seniors also represent an outsized share of healthcare spending, as Canadians age 65 and older make up 18% of Canada’s population and consume 45% of all public sector healthcare dollars spent by the provinces and territories.

The CIHI also created a new spending category, specifically COVID-19 Response Spending. Estimated at $23 billion, it will make up about 7% of total health spending in 2021, according to the institute’s preliminary estimates.

“An aging population and the continued pandemic will no doubt put more strain on our health systems and take up a larger proportion of government budgets,” O’Toole said.