Understanding the
pressures and challenges facing Ontario’s health care system and in particular
- provincial government health spending – requires an overview of the
numbers. The Canadian Institute for Health Information (CIHI) via its National Health Expenditure
Database provides a wealth of information on health spending in Canada. The 2019
edition of the National Health Expenditure release allows us to piece
together a broad picture of where health spending in Ontario has been over the
last few decades.
Figure 1 on total
health spending in Ontario provides a view of total and provincial government
health spending over the period 1975 to 2019 (with 2018 and 2019 being
estimates). They show steadily rising
spending. Total health spending on
health in Ontario was $4.4 billion in 1975 and has grown to an estimated $100.5
billion. Meanwhile, over the same period
provincial government health spending has grown from $3.1 billion to $63.4
billion. The massive growth in health
spending over time is part of the conventional wisdom that health spending is
unsustainable.
However, these numbers
are nominal totals and do not take into consideration population, inflation or
economic growth which are all necessary to provide context for these
numbers. Between 1975 and 2019, provincial
government health spending in Ontario grew 20-fold while GDP grew 13-fold,
population grew 1.7-fold and prices 5-fold.
Thus, provincial government health spending over time has grown much
faster than population, the economy or inflation. Total health spending in Ontario (both public
and private sector spending) over this same period grew by 23-fold which means
that as a share of total health spending in the province, the provincial
government share has declined over time.
Figure 2 plots the
provincial government share of total health spending from 1975 to 2019 and
illustrates the decline over time. From
a high of 71 percent in the mid-1970s, the provincial government share of
health spending fell dramatically reaching a low of 60 percent in 2002 before
recovering to 64.7 percent in 2014 and then declining again to 63.1 percent in
2019. Figure 3 plots provincial
government health spending as a share of the provinces GDP. It grew steadily until the federal fiscal
crisis of the mid 1990s when the cuts in federal transfer payments spilled over
into provincial program spending – including health.
The recovery in the
provincial government share after 2002 as well as provincial government health
spending as a share of GDP after 2000 coincides with the federal 2004 Health
Accord funding formula which saw federal transfers for health to the provinces
grow at 6 percent annually until 2017.
This escalator ended in 2017 after which they were to grow at the rate
of growth of GDP with a 3 percent floor.
The recent decline in both of these aforementioned expenditure indicators
partly reflects the slowdown in federal health transfer funding growth brought
in by the Harper Conservatives but accepted by the Trudeau Liberals.
Health spending in the
end is a very personal thing and another indicator is how much is being spent
per person after adjusting for inflation (which here is done using the CIHI
Government Expenditure Implicit Price Index).
Figure 4 plots real per capita health spending in Ontario in 2019
dollars for both total health spending as well as provincial government health
spending. Between 1975 and 2019, real
spending per capita grew from $2831 in 1975 to $6,955 in 2019 for total health
spending. Meanwhile, over the same
period, real per capita provincial government health spending grew from $2,012
to $4,386. Spending per person after
inflation has gone up over time but in what appears to be four distinct growth phases
which I will term the “Ages” of Ontario health spending.
Figure 5 plots the annual
growth rates in real per capita provincial government health spending with the
average annual growth rate for the four ages of Ontario health spending
growth. The first age, in the wake of
the creation of the Medicare system stretches from 1975 to 1989 and sees
average annual growth of 3 percent. The second
age from 1990 to 1997, encompassing the 1991 recession and the 1995 federal
fiscal crisis and transfer cut sees a decline in real per capita provincial
government health spending averaging -0.7 percent annually. From 1998 to 2010 – there is a recovery in
the growth rate of provincial government health spending as a result of a
recovering economy, the fiscal dividend from low interest rates, as well as the
healthy increases in federal transfer funding.
There is a return to 3 percent average annual growth in real per capita
provincial government health spending.
Finally, with the
expiry of the Health Accord in 2017 – and the pre-emptive response to bend the
cost curve in advance – combined with the economic slowdown after the Great
Recession in 2008-09, the growth rate plummets again eking out an increase averaging
0.5 percent annually from 2010 to 2019.
This last phase in Ontario is the slowest growth in real per capita
provincial government health spending since the mid 1990s and has resulted in strains
exhibited by crowded emergencies, hallway medicine and waiting lists for
procedures and long-term care. The
period since 2010 also coincides with an immense boom in Ontario’s population
growth especially in the GTA area and the Ontario government has been pressed to
keep pace with that growth. Effectively,
real per capita provincial government health spending has been practically
constant since 2010.
While there is a
tendency to see the recent issues in Ontario government health spending tied to
the new Ford government and its efforts to rein in the deficit, it remains that
the slowdown in provincial government health spending growth has been going on
since 2010. It starts under the McGuinty
government and continues during the Wynne administration. It is a function of a slowdown in resource
growth – federal transfers as well as the economic growth since 2010 –and deliberate
attempts to rein in the cost curve and try and make health expenditure growth
more sustainable. In this regard, the
provincial government has been quite successful in reining in expenditure
growth since 2010.
A sustainable rate of
provincial government health spending growth would see increases in health
spending match the increase in GDP, population and inflation. In other words, to be “sustainable”, real per
capita provincial government health spending should match the growth in real
per capita GDP to be sustainable. Since
2010, real per capita GDP in Ontario has grown by 9 percent- making for a low annual
growth rate of just under 1 percent.
Ontario’s economy was in the doldrums for a long time and growth has
only begun to pick up in the last couple of years.
Meanwhile, real per
capita provincial government health spending has grown at about 0.5 percent
annually. The provincial government has actually
outdone itself in reining in its health spending costs with much of the credit
to date actually going to the previous Liberal government. Oddly enough, there is a lot of clamour about
the Ford government making cuts to health care as it rolls out the Ontario
Health Team reforms while the Liberal restraint appears to have gone largely
unnoticed. I guess, when it comes to expenditure cuts, the Ontario public is
fine if a Liberal government makes spending reductions but goes to the
barricades when the Conservatives do it. It is an interesting observation on
Ontario’s political culture.
More on what areas of
spending got the most reductions in the next post.
