Ontario Government Health Spending Trends: It’s Complicated

 

The 2025 CIHI National Health Expenditure trends are out with the key national findings being that total health care spending in Canada is expected to reach $399 billion in 2025, or $9,626 per Canadian with that expenditure representing 12.7% of Canada’s gross domestic product (GDP) in 2025. Total health care spending in Canada is expected to grow by 4.2% in 2025 following a 6.1% increase in 2024 and 7.4% in 2023.  I will be dealing with the national numbers elsewhere but my interest in this post is Ontario provincial government health spending which for 2025 is estimated at $93 billion up 3.3 percent from the year previous and not as large an increase as 2024 at 6.3 percent.  While the provincial government makes much of its spending increases being at historic levels, a 3.3 percent increase does not keep up with inflation and population.

Figure 1 plots real per capita Ontario government health spending in 2025 dollars (deflated with the CIHI’s Total Health Care Implicit Price Index) along with the spending to GDP ratio for the 1975 to 2025 period and while the overall trend is upwards, the period since the pandemic is particularly noteworthy.  After the pandemic surge in real per capita provincial government health spending of 8.5 percent in 2020 and 4.9 percent in 2021, each subsequent year has seen negative growth with 2025 declining just over one-fifth of one percent. However, at $5,750 per capita ($2025), spending in 2025 remains nearly 10 percent above the 2019 amount of $5,233 ($2025) implying average spending growth since 2019 of approximately 1.7 percent annually.

 

 

What is more interesting in Figure 1 is that while real per capita provincial government health spending has been trending down since 2021, its share of provincial GDP has been going up.  How can that be?  As anemic as provincial health spending growth has been relative to inflation and population, it turns out Ontario’s economic growth has been even more anemic.  This is not the greatest news.

Figure 2 illustrates that despite slightly negative real per capita growth in provincial government health spending; there is considerable variation across categories that may signal what the government’s priorities are.  Real per capita hospital spending declined 3.5 percent in 2024 but is expected to rise 0.5 percent in 2025.  After a 5.3 percent increase in 2024, real per capita other institutions (i.e., long term care) will decline one fifth of one percent with a similar pattern for physicians at 5.1 percent in 2024 but -1.4 percent for 2025.  Other professional (e.g. optometrists) drugs, public health and administration are being hit with consecutive declines in real per capita spending.  Other health spending including home and community care is seeing an increase in 2025 while real per capita capital spending will rise nearly 20 percent in 2025.  While renewing capital infrastructure in provincial government health spending is welcome, all that shiny new equipment and buildings will need hospital and physician services as well as drug spending down the road.

 

 

And if you are interested in something different, Figures 3 and 4 present provincial government health spending by age categories to look at what an aging population has been doing to provincial government health spending.   Figure 3 plots per capita provincial (nominal dollars) government spending by age group for four years spanning the 2000 to 2023 period and they show the typical expected u-shaped cost curve with spending highest at the very early ages of birth to about 4 years, then rising gradually and growing more dramatically after the late 50s.  In 2023, the per capita spending for a person under 1 year of age averaged $17,591 dollars, for a 25–29-year-old it was $2,594, for a 55–59-year-old it was $5,037 and for an 85–89-year-old it was $29,415.  Indeed, health care costs can rise dramatically over the later years of the life cycle.

 

 

However, the astute gentle reader will note that the profiles by age have been shifting upward over time.  That is, spending has been going up for all the age categories and figure 4 plots the percent changes in per capita provincial government spending from 2000 to 2023 by age category. While spending per capita is highest for the elderly, growth over time has been the greatest in much younger demographics.  The greatest growth was in the age 10-14 category at 207 percent, followed by the below 1-year category at 204 percent, then 194 percent for those aged 5-9, 172 percent for those aged 15-19 and 169 percent for those aged 1-4 years.  After that come 35–39-year-olds at 153 percent, 40–44-year-olds at 151 percent, and 45–49-year-olds at 145 percent.

 

 

The smallest increases over the 2000 to 2023 period?  At the bottom are 80–84-year-olds at 90 percent, next highest are 75–79-year-olds at 94 percent and then 70–74-year-olds at 96 percent.  Health spending does rise with age, and much more is spent per capita on the elderly than the young.  However, in percentage terms, the greatest increases have been in the population aged 19 years and younger followed by the population aged 30 to 64 and 90 plus.  Lowest increases are in the 20-29 age groups and the 70-89 age groups.  This is an interesting and somewhat counter intuitive results given the conventional wisdom is that health care costs are being driven largely by an aging population.  It would appear the drivers of provincial government health care spending are more complicated than one might imagine.

Note: Livio Di Matteo is a member of the CIHI NHEX Advisory Panel. 

How Thunder Bay Wastes Both Taxpayer Money and Urban Core Development Opportunities

 

The City of Thunder Bay is engaged in budget season and striving to keep its total tax levy increase to 2.6 percent.  As part of its new two-part budgeting approach, the capital budget two-year plan is now underway with initiatives including $34 million in road improvements in 2026 with another $26 million in 2027 as well as initiatives in waste diversion and transit. The proposed capital budget for 2026 amounts to $160 million while 2027 is going to be lower at $148 million. January will see the operating budget and with the 2025 total levy at $241.7 million, a 2.6 percent increase could bring the levy up to $248 million.

The proposed 2026 tax levy increase is indeed modest by recent historical standards as the accompanying figure shows as  the 2025 increase was 5.2 percent and 2025 was 4.5.  However, the proposed 2.6 increase is also below the average increase over the 2015 to 2025 period which comes in at 3.4 percent.  Of course, increases need to be balanced against what the needs are and keeping rates low for their own sake is not necessarily the ultimate policy objective.  Rather, the aim should be to provide the best public services desired at the lowest costs possible which implies efficient and not wasteful spending, which brings me to the main event.

 

 

Whether the City of Thunder Bay will come in with a tax levy increase of 2.6 percent or not remains to be seen.  However, what is more important is what often seems to be a lack of strategic direction with how Thunder Bay seems to allocate its spending and projects by doing them in a manner that often works at cross purposes.  A case in point is the recent moves to build density housing in the City of Thunder Bay to address the housing shortage and provide affordable housing. 

The City of Thunder Bay is preparing to sell municipally owned land to developers to build density housing.  The pieces of land are:  300 Tokio Street, 144 Fanshaw Street, 791 Arundel Street, and the land between 211-223 Tupper Street and 224 Camelot Street.  Despite the oft stated claim to want to provide affordable housing, the City has apparently rejected a developer’s affordable housing bid for the land that included transitional housing because it was not dense enough. The City of Thunder Bay wishes for: 400 units on Tokio Street, 200 on Fanshaw Street, 600 on Arundel Street, and 185 on Tupper/Camelot streets for a total of about 1,385 units.

Now, Thunder Bay municipal politicians are very good at using the right words and as one councillor was quoted:

<<"There is no question that we are in a housing crisis, not only in the city of Thunder Bay, across the province and across the nation," Foulds said. "We're also in a climate crisis."

"In order to deal with those two huge issues, we do need to have a focus on intensification and increasing the density of our cities, building on existing infrastructure. With that said, we do need to make sure that the infrastructure can handle it. We also must make sure that the developments are appropriate and safe.">>

The problem here is that Thunder Bay’s idea of increasing density in a climate crisis apparently includes cutting down swaths of green space to build density development in areas often removed from where density either already exists or should be promoted.  Moreover, the constant dispersion of new development results in the new residents of these “density developments” having to rely mainly on automobile transport rather than public transit which is not convenient or timely given the dispersed nature of the city.

As noted in an earlier post:

<<Of these four proposed locations, three are essentially going to be plonked on available space – often green space – in the midst or immediately adjacent to existing residential areas.  Only one – the Camelot Street location is going to be placed near a downtown core area.  And that is the point.  To date, the large builds on Junot and Fulton have been built in or adjacent to existing lower density residential areas and often at the expense of nearby green space.  Except for Camelot – which is a good location if one is planning to build up core area density – these are all scattered willy-nilly in places where the only option is to drive somewhere to get anything done.>>

As noted in the same post, the logical place to target density developments in Thunder Bay should be the two former downtown cores areas of Port Arthur and Fort William and the corridor connecting them that runs along and immediately adjacent to Water/Fort William Road/Simpson Streets and Algoma/Memorial/May Streets.

So, how does this come back to my point about wasteful spending? Thunder Bay is constantly trying to revitalize its core areas – the former cores of Port Arthur and Fort William - with initiatives that cost millions of taxpayer dollars.  For example, the recently completed north core/Port Arthur streetscape project clocked in at about $13 million.  Currently underway is the south core/Fort William Victoria Avenue revitalization project which is going to kick in at $18.4 million.  Then there is the Simpson Street redevelopment cost from the end of Victoria Avenue to the Ogden/Dease Street area which is approaching the $8-$9-million-dollar cost. 

In total, this is almost $40 million dollars in capital spending and rather than being additionally leveraged into a denser set of core urban areas with the tens of millions of dollars in federal housing infrastructure money, it is going to be left to mainly its own devices to attract residents.  And beyond these four proposed projects, there is the proposed Central Avenue Development Lands project which while ostensibly in the “center” of the city will build over 40 acres of largely wooded area eliminating much of the green corridor that runs from Lakehead University through to the College and ultimately Chapples Park. 

Thunder Bay’s development motto is essentially “density if necessary but not necessarily urban density.”  Thunder Bay equates urban density as simply the act of putting multi-residential units on anywhere the city has surplus land rather than working with owners in existing brownfield areas to consolidate derelict and underused properties. Infill is not always the same as creating urban density.  Thunder Bay wastes taxpayer money by providing business owners in the former core areas with beautification baubles but then does not follow up with real strategic investment in those areas.  It is the type of short-term thinking that has led to the creation of a dispersed and costly to service city with an over-reliance on automobiles.  Enjoy the short-term construction benefits from all the new housing projects as the future costs to both the taxpayer in servicing costs and the environment will be substantial.

Thunder Bay Is Missing Its Chance for Strategic Urban Density

 

After decades of low growth, Thunder Bay has been experiencing a period of growth that affords it an opportunity to reshape its urban landscape.  Historically, Thunder Bay has allowed its urban footprint to expand in a low-density highly dispersed web that is more costly to service and provide efficient infrastructure such as water and sewer as well as public transit.  The recent spate of population growth as well as the availability of provincial and federal money for housing means that Thunder Bay could be making some major strides building density in its core urban areas.  This of course would complement the rather large dollar amounts that have recently been expended for urban redevelopment projects in the downtown cores such as the North Core Streetscape Project and the Victoria Avenue Revitalization.

Alas, in its haste to meet federal and provincial housing targets and obtain government money, Thunder Bay is on the verge of yet again squandering the opportunities that have presented themselves by engaging in short term decision making that will build scattered density developments that will sprout like toadstools after a summer’s rain. City officials have noted that they are only 32 percent of the way in meeting their housing targets and must build an additional 1200 units by February 2027 to meet the target of 1,755 housing units. The proposed locations for density development are at 300 Tokio Street, 144 Fanshaw Street, 791 Arundel Street, 211-223 Tupper Street and 224 Camelot Street. 

Of these four proposed locations, three are essentially going to be plonked on available space – often green space – in the midst or immediately adjacent to existing residential areas.  Only one – the Camelot Street location is going to be placed near a downtown core area.  And that is the point.  To date, the large builds on Junot and Fulton have been built in or adjacent to existing lower density residential areas and often at the expense of nearby green space.  Except for Camelot – which is a good location if one is planning to build up core area density – these are all scattered willy-nilly in places where the only option is to drive somewhere to get anything done.

Thunder Bay needs to use this opportunity for growth to be more strategic in how it does its housing if it wants to truly build density.  The density housing projects in this city should be designed to concentrate population near services and amenities, not encourage more time-consuming commuting in the long run, to meet short term funding targets. The density build locations in Thunder Bay should be the two former downtown cores areas of Port Arthur and Fort William and the corridor connecting them that runs along and immediately adjacent to Water/Fort William Road/Simpson Streets and Algoma/Memorial/May Streets.  It is up to the mayor and council to provide this type of directive to its administration because simply asking them to come up with sites for density build will generate the quickest solution rather than a methodical plan for infill.

 

What might such a density corridor look like?  A good example is rooted in the urban renewal studies of the past.  Plate 20 of the 1968 Proctor and Redfern Downtown Fort William Urban Renewal envisioned a Simpson Street with density rental housing as the accompanying figure illustrates. Many of those apartments or condos would likely have sweeping views of the lake and provide for a mix of both premium and affordable units with room for shops, stores and offices on the street level.  Indeed, the recent redevelopment of Simpson Street's road and sewer infrastructure should have presented an opportunity for the consolidation of derelict and underused properties to build the multi-unit buildings the city seems to so desperate to ram through existing residential neighbourhoods and green space.

This opportunity is going to be short-lived and if we simply build things in an erratic short term pattern, we will have to live with the costs for decades to come.  Our municipal politicians need to actually step up and lead for a change by providing direction rather than hide behind bureaucratic processes.  This window of opportunity will not last long.

Thunder Bay Reaches Employment Peak

Thunder Bay has hit an employment milestone.  Data from the Statistics Canada October 2025 Labour Force Survey shows that for the month of October, Thunder Bay hit an employment level of 68,200 jobs.  This was an increase of 700 jobs from September 2025 and 2,100 jobs from October of 2024.  Annualized October to October, employment in Thunder Bay was up 3.2 percent.  Moreover, October 2025 was the highest monthly employment total ever going back over nearly 40 years to 1987.  The accompanying figure plots the monthly ebbs and flows of employment since 1987 (along with a 5th order polynomial smooth to illustrate trend) and while there have been other notable peak periods such as June 2003 (67,400), April 2023 (67,100) and June 2018 (66,200) it remains that 68,200 is the largest yet.  

 

There has definitely been an upswing in employment since 2015, notwithstanding the pandemic drop. Thunder Bay has seen substantial economic activity over the last couple of years particularly as a result of numerous construction projects for housing along with highway work and some major institutional projects such as the one billion dollar new correctional facility, the art gallery and most recently the start of the multiplex turf facility. Of course, whether this can be sustained over the long term is an important question and Thunder Bay's peak employment figures have largely fluctuated between 65,000 and 70,000 jobs but have never been able to break out of this corridor.  Depending on what the impact of federal and provincial infrastructure money is down the road, as well as whether the region's mining projects for critical minerals indeed come to pass. 

Nevertheless, good news for the time being 

The Road Ahead: Pictures of Federal Budget 2025

 

With Tuesday’s federal budget receding into history, the opportunity for more reflection emerges and the best way to do that is to look at some charts that consider the budget's projections going forward.  In terms of overall impressions, the mantra of this budget was simply “to spend less so we can invest more”.  After looking at the numbers, the reality is really “to spend less on some things so we can spend a lot more on some other things”.  It bills itself as a transformative budget to address a changing economic world that will build a confident, secure Canada though generational investments in infrastructure and defence and does so largely by adding significantly to the national debt through a series of large deficits. 

The expenditure trajectory is largely a continuation of what was.  However, there is a compositional shift in that spending away from spending on social infrastructure and towards physical infrastructure.  In essence, the federal budget seeks to grow the economy by investing in a lot of public infrastructure projects and national defence and then providing incentives to encourage the private sector to join in. The broad dimensions of both the spending and the outcomes are summarized in the following charts.

Figure 1 plots total federal revenues, expenditures (left axis) and the deficit (right axis) starting from 2010-11and going forward to 2029-30.  As well, each series is fitted with a linear trend.  By 2029-30, total revenue is projected at $583.3 billion and total expenditure at 639.9 billion for a deficit of $56.6 billion.  From 2025-25 to 2029-30, total revenues will grow by 14.1 percent, total expenditures will grow 16.9 percent and there will be $321,7 billion in accumulated deficits. Note the linear trends.  The deficit over the long term is growing as the gap between revenues and expenditure is rising.  

 

A lot is going to be borrowed and servicing the debt will become more expensive over time.  Figure 2 plots both the nominal value of debt charges ($mm) as well as the total expenditure share of debt charges (percent) and does so over a much longer-term perspective starting from 1966-67.  Staring in 2020-21, debt charges began to increase dramatically because of both increased debt (due to COVID) as well as rising interest rates to service the debt and trend will continue.  On the bright side while the debt charge share of total spending is also rising and is projected at 12 percent by 2029-30, it is well below the peaks attained during the 1990s when nearly one third of every dollar of federal spending went to service the debt.

 

Figure 3 also provides a long-term perspective on the net debt both in nominal dollars as well as a share of GDP.  The upward trajectory of the nominal debt after 2018-19 is quite startling with the net federal debt expected to hit 1.798 trillion dollars by 2029-30. Indeed, the period from 2024-25 to 2029-30 will see $404 billion dollars added to the net debt representing over one fifth of the total net debt accumulated in just six years.

 

Of course, all this spending is targeted at dealing with the turbulent world we live in and is being justified as the big transformative spending we need to build Canada’s economy in the face of global competition, tariffs, and the erosion of our relationship with the United States.  Ultimately, the payoff is supposed to be a robustly growing and productive economy.  The next few years however see nominal GDP pretty much close to its historical average of about 4 percent and even assuming population grows at a more historic one percent annually, real per capita GDP is not poised to take off any time soon.  

 

Figure 4 plots real per capita GDP (deflated using the CPI by the way) and its percent growth over the long term.  Notice our productivity dilemma nicely summarized by the long-term downward trend of the growth rate.  Based on nominal GDP growth as forecast in the budget, population growth at one percent annually and inflation at two percent, real per capita GDP is projected to nudge upwards going forward from 2024-25.   It is going to be a tough few years.  It is a gamble to spend all this money with the long-term success predicated on the private sector joining in.  Hopefully, it will work.