Provincial health plans’ sustainability at risk: C.D. Howe

by Leo Almazora08 May 2019

While provincial governments are planning for healthcare budget growth that should be fiscally sustainable, the actual growth in healthcare costs is going beyond what the long-run ability of Canada’s economy and tax base can support, warns a new report from the C.D. Howe Institute.

In Healthcare Spending Overshoots a Threat to Sustainability, C.D. Howe Institute President and CEO William B.P. said that growth in healthcare spending has been on the rise over the last four years as governments continue to overshoot their initial budget targets.

Pointing to the National Health Expenditure (NHEX) report, an annual publication from the Canadian Institute for Health Information (CIHI), overall growth of healthcare expenses for 2018 was 3.8%, which was in line with most estimates of potential GDP growth. But if it were to be revised following the trend of previous years, the final 2018 figure would clock in at 4.6% — outpacing potential GDP growth and anticipating a combination of rising taxes, increased borrowing, and a pinch on other government programs.

“These figures reflect only intentions as reflected in budgets,” Robson said, referring to initial estimates of provincial and territorial government that are reflected in the NHEX. “Past history tells us that the revised, actual figures are typically materially higher.”

Going back over the 20-year record of NHEX reports, the CIHI report found that later numbers reflected growth in actual provincial and territorial health expenses that was an average of 0.8% faster than the preliminary estimates. Given overshoots that large occur across the country, year by year, judgments about the sustainability of publicly funded healthcare may be called into question.

“If governments had actually spent what their preliminary numbers indicated, their current healthcare spending would be $29 billion lower – more than half of provincial healthcare spending in Ontario – than it is,” Robson noted.

Focusing on the provincial and territorial experience from 2014 to 2017, the CIHI report found that overshoots were more common than undershoots.

All four provinces in the Atlantic region prefigured spending increases of about 2%, which later numbers overshot or undershot only to a minor degree. Quebec’s preliminary numbers tended to point to modest increases, but the later numbers would show startling overshoots. Ontario’s preliminary numbers suggested even more modest increases, though later numbers would typically overshoot the initial estimates by 0.8% annually.

Preliminary numbers west of Ontario generally pointed to more sizeable increases; later numbers would reflect overshoots in all members of the group except for Manitoba. And while Nunavut’s preliminary numbers showed a decline, all three territories’ later numbers revealed large increases and overshoots.

“Ensuring that publicly funded healthcare is fiscally sustainable will require better spending discipline overall and changes to better align the activities of managers, providers and patients with our capacity to pay,” the C.D. Howe Institute said.