Ontario Health Spending: What's Up and What's Down

 The Canadian Institute for Health Information (CIHI) has released its 2024 National Health Expenditure Trends data and it paints an overall picture of rising health spending.  As I have noted elsewhere, total health-care spending in Canada is expected to increase by 5.7 percent in 2024, after rising 4.5 percent in 2023 and only 1.7 percent in 2022 coming on the heels of the pandemic.  The picture for provincial government health spending is also one of increase but once adjusted for population and inflation, the results are more mixed particularly if one looks at changes since the year before the pandemic.  Over the period 2019 to 2024, British Columbia and Prince Edward Island see the largest increases in real per capita provincial government spending at 17 and 16 percent respectively while at the bottom are Manitoba and Nova Scotia, which over the five years have seen their per capita provincial government health spending stay essentially flat.  Ontario, over this same period saw an increase of just under seven percent.

 

 

Figure 1 plots real per capita Ontario provincial government health spending ($2010) from 1975 to the present and the evidence shows that since 2010, real per capita health spending spending growth was lackluster at best rising from $3,617 to $3,783 - an increase of of 4.6 percent or about half a percent annually.  After 2019, the pandemic saw a ramping up provincial government health spending to a peak of $4,316 in 2021 - an increase over two years of almost 14 percent.  Since 2021, there has been a decline in real per capita spending and in 2024 it is estimated to sit at $4,040 - for a decline of about 6 percent.  Nevertheless, real per capita provincial government health spending in 2024 is still projected to be 6.8 percent higher than 2019.

 

What is quite interesting is how spending by expenditure category has performed over the 2019 to 2024 period.  Figure 2 plots the percentage change in real per capita provincial government health spending by category.  Over this five year period, the largest increase has been for real per capita spending on other institutions - namely, long-term care - at nearly 50 percent.  This is of course understandable in the wake of what transpired in long-term care homes during the pandemic as well as the promise to build more long-term care beds for an aging population.  Next is home and community care at 10.7 percent , followed by public health at 9.3 percent and then hospitals at 8 percent.  Other professionals is next with an increase of 5.3 percent followed by capital at 3.2 percent.  What comes next however is even more interesting .  All other health care net of home and community care spending is down by about a third of one percent.  Spending on provincial government drug plans in real per capita terms is down 4.4 percent while physician spending is down 5.8 percent.  Finally, real per capita provincial government health spending on health administration is down nearly 24 percent. 

 The surprise here is that spending has dropped on two items that directly affects a lot of individuals in Ontario - namely, government paid for prescription drugs and physician services.   Obviously, if one measures availability of physician services by how much is being spent per person after population growth and inflation, it is obvious that Ontario is having trouble keeping up in this category.  With an aging population, the decline in physician and also drug plan spending is definitely going to be felt even if the provincial government asks us to take solace in the increases in long-term care, home care and hospital spending. 

What is a Provincial Government to Do?

 

Ontario is coming up to Budget Day next week on March 26^th and it will be interesting to see what the provincial government does on a number of issues because quite frankly the provincial government is in a bit of a pickle when it comes to economic and fiscal policy.  Over the last decade, Ontario has been hit by a productivity decline that has translated into slower economic growth.  Since the pandemic, this has been combined with a bout of inflation and a surge in population growth.  When you start looking at Ontario fiscal and economic indicators in real per capita terms, there are going forward disturbing implications for our standard of living.

 

If one compares the 2023-24 fiscal year forecast from the Fall Economic Update with the 2018-19 fiscal year, total provincial government revenues and expenditures are up approximately 30 percent respectively.  Health expenditure is up 33 percent.  The size of the provincial economy is up 22 percent.  On the surface, this is seemingly good news in the wake of the pandemic.  The problem is that over the same period, population in Ontario has grown by an estimated 12 percent while prices have risen nearly 19 percent.  Put another way, the combination of population and inflation at nearly 30 percent has outstripped nominal GDP growth while essentially matching the growth of government revenues and expenditures and in particular health spending.

 

The best way to visually illustrate these effects is to create an index.  Figure 1 uses data from Statistics Canada, the Fiscal Reference Tables and the 2023 Ontario Fall Economic Outlook and Fiscal Review to create real per person indices of economic and fiscal performance setting 2013/14 as 100.  Figure 1 plots real per capita (deflated using the CPI-All Items Index) Ontario provincial government Own Source Revenue, Federal Transfers, Total Revenue, Program Expenditure, Debt Service Costs and Total Expenditures.  Note that 2023-24 is an estimate.

 

 

 

In real per capita terms, debt service costs have been a bright spot in that despite the continuing rise in both the provincial net debt and interest rates, inflation and population growth have served to reduce the real per capita burden of servicing Ontario’s debt.  Indeed, the drop-in debt service has probably been able to free up resources for program spending. On the other hand, compared to 2018/19, real per capita revenues and expenditures are now below where they were.  In other words, provincial government revenue and spending have not kept up with inflation and more importantly population growth.

 

 

 

Figure 2 illustrates the decline in the Ontario way of life a bit more succinctly.  Does the health care system feel strained?  Real per capita provincial government health care spending after the surge of the pandemic is back to where it was in 2018/19.  Indeed, it has not changed much since 2013/14.  During that time, one imagines that labor costs for health care have gone up pretty dramatically which means there are indeed fewer doctors and nurses available to service a growing population. And to top it all off, real per capita output in Ontario has not kept pace with either inflation or population growth.  While real per capita GDP in Ontario grew somewhat from 2013/14 to the pandemic, it has since declined.

 

Looking at Figure 2, if the average Ontario had to ask themselves am I better off than a decade ago when it comes to my real per capita income and health spending, the answer is one that should concern the provincial government.

A Primer for Premiers: Some Health System Metrics

 Canada's Premiers are meeting in Winnipeg July 10-12 and along with all the photo opps and media availability sessions, they are also expected to have some discussions on a number of pressing policy concerns including how to spend the forthcoming increases in federal transfers.  Given that none of them have yet submitted plans on the targets and timelines they will use to convert the increased funding into health system improvement outcomes, one suspects it will be some time before the funding increases have any impact. 

 

 

 

Of course, it remains that simply increasing funding alone will not necessarily solve the current chaos as emergency rooms close down during busy summer months, the rosters of people without family physicians grows as physicians retire and nursing shortages lead to delayed or postponed procedures.  As the premiers know, Canada already is one of the biggest spenders in the OECD on health and well above the OECD average both as a share of its economy (See figure 1) and in dollars per capita (See figure 2) .  Yet, as figures 3 and 4 illustrate, this larger amount of spending does not translate into more physicians per capita or more hospital beds per capita.  

 

 

Now these simple types of comparisons can be critiqued on a number of levels.  After all, while we have fewer physicians per capita, our nurses per capita match the OECD average.  Moreover, Canada's physician to population ratio has been rising in recent years and it has been noted that simple physician to population ratios are not always helpful.  Physicians in many other countries sometimes perform a broader range of functions than physicians in Canada which means having more of them per capita is not always an indicator of greater availability.  Yet, if you look at physician consultations per capita, in 2019 - just before the pandemic - Canada stood at 6.6 while the OECD average was 7.0.  

Canadian physician consultations per capita a decade ago were above the OECD average meaning that with fewer physicians per capita and higher consultations, Canadian physicians were seeing more patients than their international counterparts.  That appears to no longer be the case. The case loads of the average Canadian physician have been declining and part of that is a change in practice culture and the arrival of the desire for better work-life balance.  And there are other indicators where Canada does not perform as well - we are below the OECD average on diagnostics such as MRI and CT scans per million population. 

So, throw in the chaos of the pandemic era, and we can see that the current problems are a function both of long term trends in Canadian health system resources, practices and staffing combined with the short-term shock of the pandemic's disruptions.   We are already spending a lot more money than many other countries but we are definitely seeing less health service outcomes with that money.  The per capita statistics also in the Canadian case reflect the fact that there are a lot more people in Canada given recent population growth which when combined with an aging population has certainly resulted in demand side increases too.  The Premiers face quite the challenge.  They will have more money to spend and do need to spend more to deal with the short term supply shortfalls.  At the same time, they need to set up mechanisms to ensure that over the medium to long term, more money does not continue the recent trends of spending more and getting less.

Ontario's Chronic Health Spending Shortfalls

 

This week’s Ontario health news featured a report by the province’s  Financial Accountability Office that the challenges facing Ontario’s health system were “expected to persist” as a result of under funding and accompanying shortages of health workers. The FAO projected total health sector spending for Ontario and compared it to the Ontario government's projections and found that between 2022-23 and 2027-28, a significant gap opens up between what the government is projecting and what the FAO expects spending to be.  The cumulative shortfall over this period will be about $21 billion which over a seven year period averages out to about $3 billion a year.

 

The FAO projections were for total government health spending but one suspects that if one takes Ontario’s robust population growth into account, the future shortfalls are probably more serious.  Indeed, per person provincial government health spending going into the pandemic was essentially flat  as Figure 1 shows.  

 

 

 

 It turns out that spending shortfalls have been a feature of Ontario health spending for some time when one compares what is actually being spent to what simple models of health spending determinants predict should be spent.  

 

Generally speaking, models of health spending determinants consider the main drivers of health spending to be income (usually measured by GDP) and aging (usually measured by the proportion of population over 65 years). Fun fact: In Ontario, the proportion of population aged over 65 was 8 percent in 1965 and in 2022 stands at just over 18 percent.  Table 1 uses data from the Canadian Institute for Health Information National Health Expenditure database as well as data from Statistics Canada to present  a simple regression of the determinants of real per capita Ontario provincial government health spending. Real per capita provincial government health spending (in 2021 dollars) from 1971 to 2022 is regressed on real per capita GDP as well as real per capita federal cash transfers (health, social, equalization) – which is really a source of provincial government income.  As well, there is included the percent of the population aged 65 to 79, the percentage of the population aged 80 years and over, and a dummy variable to capture the impact of the COVID spending surge. The results are estimated with STATA using OLS .  

 

 

 

Both per capita GDP and per capita transfers are both positive drivers of provincial government spending.  A one dollar increase in real per capita federal cash transfers supports about 50 cents in real per capita provincial health spending while a 1 dollar increase in real per capita GDP is associated in a 3-cent increase.  The results also suggest that relative to the population aged below 65 years, the real aging driver of spending is the proportion aged over 80 years.  The percentage aged 65 to 79 seems to be negatively associated with real per capita provincial government spending.  Put another way, there may be a healthy survivor effect in that if you make it to 65, you are likely to be in relatively good shape until you approach 80 when the costs of aging quickly escalate.  And, these results implicitly suggest that the proportion under age 65 is a bigger driver of spending that popular belief thinks it is.

 

The coefficients in this regression can be used to generate predicted Ontario government health spending based on the determinants and then compared to actual spending.  These results are plotted in Figure 2.  In the immediate wake of the Great recession – between 2010 and 2012, actual real per capita government health spending in Ontario exceeded what the economic determinants predicted it should be.  However, from 2012 to the onset of the pandemic, not only was inflation adjusted Ontario government health spending per person flat, but it was below what the model predicts it should have been.  For example, in 2016, Ontario spent $150 per person less on provincial government health spending - about 3 percent less per capita. When the per capita numbers are aggregated to population totals, the numbers are in the billions.  On average over the period 2012 to 2019, Ontario spent an average of 1.1 billion dollars less than what the model predicts. Some years, this shortfall was as high as 2.5 billion dollars. And, with the pandemic winding down in 2022, it appears the shortfall has reemerged with spending $2.1 billion below what it should be. 

 

 While it has long been known that per capita government health spending in Ontario is below that of the other provinces, it is also lower than what Ontario's own economic and social health spending drivers predict it should be. 

The Provinces and Federal Health Transfers

 

The federal and provincial health ministers meeting in Vancouver last week ended somewhat abruptly without an outcome regarding an increase in transfers. The provinces have been asking for increases to the Canada Health Transfer that would raise the federal share of provincial health spending from 22 percent to 35 percent.  Given that for 2022-23 the Canada Health Transfer to the provinces is expected to be 45.2 billion dollars, such an increase would amount to an additional cash transfer of well over 25 billion dollars.

 

The provinces maintain that they need the money to deal with an increasingly strained and stressed system beset by labour shortages and the aftermath of the pandemic.  The federal government is leery of simply handing over the money without conditions because of the concern that more money without structural reforms to the health system or some conditions is simply business as usual.  After all, the enhanced transfers of the 2004 Health Accord with its 6 percent annual increase escalator that lasted until 2017 was supposed to buy fundamental reforms and transformative change and yet the same problems persist pandemic notwithstanding.

 

The solutions here are problematic.  The federal government could simply hand over more money given that health is a provincial responsibility and wash their hands of the matter.  However, given their concerns that the provinces may not necessarily spend the money on health given they are almost as busy as the federal government in handing over rebates and assistance to deal with inflation, they are unlikely to do so.  They could proceed unilaterally and create a grant with conditions that provinces could accept if they wished or otherwise deal with the matter on their own – probably by increasing their own source revenues (i.e., raise their own taxes) . Or they could simply do nothing and wait for the provinces to come around.  After all, health is a provincial responsibility and the blame for a lack of family physicians or crowded ERs ultimately lands at the feet of provincial governments.

 

Of course, in dealing with the issue it is perhaps useful to look at some indicators to see what the dimensions of the problem might be.  The accompanying figure plots the average annual growth rates from 2008 to 2022 for an assortment of health spending, fiscal and economic indicators. This period includes both the pandemic as well as the 2008-09 Great Recession - both periods that saw surges in federal spending including transfers.  This period also coincides with the 2004 Health Accord and its immediate aftermath.  The results are intriguing given that they provide some support to both sides in this debate.

 

 

 

The average annual growth rate (all growth rates here are nominal) for total federal transfers was 5.6 percent with the component Canada Health Transfer and Equalization growing at 5.2 and 4.1 percent respectively.  Provincial-Territorial government health spending over the same period grew at an annual average of 5 percent – slightly below the rate of growth of the Health Transfer.  Needless to say, score one for the federal side.  Moreover, total provincial-territorial program spending (including Health) grew at 4.8 percent which means that program spending net of health was also growing slower than health. Score one for the provincial side – the money is not necessarily going to other programs.  P-T health spending is growing faster than either nominal GDP or population (though once inflation and population growth are factored in it means that per capita spending growth has been rather anemic). 

 

Nevertheless, total P-T health spending has grown faster than GDP, but provincial-territorial own source revenues have grown slower than GDP while the value of the much-vaunted federal tax points have grown at nearly the rate of GDP.  Here, the federal government can claim that there is indeed own source revenue capability on the part of the provinces that remains untapped.  On the other hand, the provinces can claim that they are caught in a bind – on the one hand they are trying to bend the cost curve to address sustainability issues (hence the anemic per capita growth rate) while on the other hand the high growth rate of total population plus the aging of the population is adding to total health spending at a rate they are having difficulty coping with.

 

Is there a solution here?  In the absence of a unilateral federal move of transfers with conditions (which is not going to work for everyone) the only solution here is a political one and if the two sides are not talking it is a long way off.

Physician Numbers in Canada and Ontario: Evolution and Ranking

 

The health system in Canada and Ontario is faced with shortages of health professionals in the wake of the COVID-19 pandemic.  Added to this is long-term rising demand for services because of an aging population as well as the impending retirement of large numbers of health professionals given the age distribution of the health work force.  Access to physicians – particularly family physicians - has been a long-standing issue in Canadian health care.  Yet, it remains that despite the constant perceived shortages, physician supply has been increasing.  Figure 1 and 2 present physicians per 100,00 population in Canada followed by Ontario for the period 1978 to 2020.  The plots use data from the Canadian Institute for Health Information/Scott’s Medical Data Base (CIHI/SMDB) and show physician intensity for total physicians as well as specialists and family physicians. 

 

 

 

 

After a period of growth from the late 1970s to the early 1990s, physician intensity showed little growth for nearly 15 years.  Starting approximately 2005, the number of physicians per 100,000 began to increase.  In Canada, total physicians per 100,000 rose from 190 to 242 between 2005 and 2020 – an increase of 27 percent.  Specialist density rose from 93 to 119 (28 percent growth) while family medicine physicians rose from 98 to 123 (a 26 percent increase).  Ontario exhibits a similar profile to Canada except that the 1990s to 2005 saw a more pronounced decline in physician density – particularly in family practice.  Since 2005, the total number of physicians per 100,000 rose from 177 to 232 – an increase of 31 percent.  Specialists grew from 92 per 100,000 to 114 – an increase of 24 percent – while family practice physicians rose from 85 per 100,000 to 115 – a 35 percent increase. 

 

 

 

Ontario was hit harder than Canada by the decline in physician intensity of the 1990s as shown in Figure 3 which plots total physicians per 100,000 population for Ontario and Canada. Up until the early 1990s, Ontario’s physician density was a bit above Canada but since then a persistent gap has opened up.  In 2020, Ontario had about 5 percent fewer physicians per 100,000 relative to Canada as a whole.  But the rest of Canada need not feel too smug.  When compared to the OECD countries or the G-7, Canada and Ontario do not fare particularly well with respect to physician numbers.  As Figure 4 illustrates for the period 2000 to 2020, Canada and Ontario are at the bottom of the G-7 countries as well as well below the OECD average.   

 

 

 

Germany and Italy are at the top of the G7 at 447 and 400 physicians per 100,000 population respectively.  The OECD average is 366.  In 2020, Canada was 34 percent below the OECD average with respect to physician density while Ontario was 37 percent lower. Canada gets by with many fewer physicians relative to other economically developed countries and Ontario gets by with even less.  While there has been substantial growth in physician density in Canada and Ontario since 2005, in Ontario population has also been growing quickly and  actually outstripped physician growth since 2018 actually resulting in a drop in the number of physicians per 100,000. 

Health Care in Ontario: Not Getting Better Anytime Soon

 

Ontario’s public health care system is once again making headlines – this time with respect to emergency room waits.  In the GTA, wait times in emergency rooms can be six to eight hours while in some smaller centres in Ontario you cannot even get an emergency room physician. Hospitals in general appear to be at 100 percent capacity or more and it is not just a bed shortage but also a staffing shortage.  Growing and aging populations, continued COVID-19 admissions as well as treatment for long-COVID and not to mention the surgical backlog from procedures cancelled during the peak COVID waves and one begins to see alarming strains on a system that was already strained pre-pandemic.  All of this does not even consider what has been happening in long-term care.  And of course, a rather large chunk of Ontarians still does not have a family physician even though we now have more physicians per capita than we did a decade ago.

 

Of course, looking ahead one begins to see that Ontario’s health care spending by the provincial government – already amongst the lowest in per capita terms amongst Canada’s provinces – is not going to improve anytime soon.  Indeed, if one looks at the spring 2022 Ontario budget, makes some projections for population growth and inflation, one sees that by 2025, real per capita Ontario government health spending will be where it was in 2019 just before the pandemic.  Moreover, that spending in real per capita terms was essentially flat since the end of the Great Recession circa 2010.

 

Figure 1 provides some evidence.  Real per capita spending from 1975 to 2021 is calculated from the most recent edition of the Canadian Institute for Health Information’s 2021 National Health Expenditure Release. Another series for 2021 to 2025 is calculated from the Ontario Spring 2022 budget with the numbers assuming inflation of 2.5 percent annually until 2025 and population growth of 1.2 percent.  The money is inclusive of COVID-19 support spending with 2021 marking an interesting break point depending on whether you use the CIHI estimates for 2020 and 2021 or the Spring 2022 budget medium term fiscal plan numbers that start in 2020-21. 

 

 

 

For 2021, the CIHI has Ontario provincial government health spending forecast at $75.2 billion (including COVID-19 supports) and $71.7 billion excluding them. On the other hand, the Ontario spring 2022 budget says base health care spending for 2021 (fiscal 2020-21) will be $64.4 billion with COVID-19 limited time funding at $19.1 billion bringing us to a total of $83.5 billion.  There have been issues with what the provincial government has said they would spend on COVID-19 and what they actually have.

 

No matter, combining the numbers and going forward to 2025, real per capita provincial government spending including COVID-19 spending (in $2020 dollars) was $4,523 in 2019 and in 2021 reached $4,987 using the CIHI numbers and $5,538 using the 2022 Ontario spring budget numbers.  Spending on health in Ontario did rise dramatically during the pandemic - it is just a question of by how much.  The provincial budget then shows base spending in health rising to $78.3 billion by 2025 (up from $64.4 in 2021) while COVID-19 spending declines to $12 billion in 2022, $6.9 billion in 2023 and then is zero afterwards.  So, by 2025 real per capita provincial government health spending will be $4,486 dollars – down from $4,523 in 2019.  From 2010 to 2025, real per capita provincial government health spending will have grown from $4,388 to $4,486 – an increase of 2.2 percent spread out over 15 years – annual growth of just over one-tenth of one percent.

 

How can the Ontario government increase health spending by billions of dollars more and yet spending per person is essentially flat for a fifteen-year period?  The spending on health has essentially not kept up with inflation, and population growth as well as given the additional demands being made for new drugs and treatments and an aging population.  Moreover, compensation has grown in the health sector – with additional payments during the pandemic – and the fact is that despite all these demands for additional in real terms we will be spending the same amount per person that we were fifteen years ago.

 

From a historical perspective, flat real per capita health spending appears to be a new era given the increases of 1975 to the early 1990s and then the late 1990s to about 2010.  Real per capita spending fell from about 1991 to 1996 in Ontario as the federal fiscal crisis led to a reduction in transfer payments.  The last fifteen years are in a league of their own when it comes to trends.  Not automatically spending more every year and keeping up with inflation and population growth means that the health care cost curve that everyone was worried about as being unsustainable has been sustainable for over a decade now – once you factor out the effects of the pandemic. In some ways, one might claim this as a success story unless of course you are in an ER waiting for a bed.

 

At the same time, keeping spending per capita constant means that over time more and more difficult choices will need to be made as the population ages, labour shortages worsen, and new treatments clamour for funding.  And remember that per capita spending has been constant, but Ontario already ranks pretty much as the bottom of several health resource indicators including hospital beds per capita and spending per capita.

 

There is no immediate way out of this.  How to get more resources into the system?  You can raise taxes and spend more – an unpopular solution especially now during a time of inflation and rising costs. You can spend less on other things such as education, social services, transportation, and other government services and spend more on health.  This will of course generate political winners and losers in the government funding sweepstakes and generate as many unhappy campers as happy campers.  Governments generally like to keep as many campers as possible happy unless they happen to be considered an inconsequential voting bloc.  Just ask families with one stay at home parent when it comes to tax treatment by the income tax system.

 

You can delist services currently being provided by the Ontario public health care system and transfer them onto the public as private spending which will provide more money to spend on the remaining public services.  However, this always seems to be forbidden territory in Canadian public health care despite it being a feature of other public health care systems we sometimes hold up as models – namely western Europe - and is therefore done incrementally.  Over the years, Ontario has delisted certain services but always on a piecemeal basis rather than part of a comprehensive reform package to contain the political fallout.   It also remains that Ontario already has the largest private financed share of health spending in Canada at about 66 percent. 

 

You can try to reform the current system to make it more “efficient” but short of delivering a pay cut it is hard to see how much more efficient you can get after fifteen years of standing still in per capita terms.  Sure, there are some efficiencies from reorganizing and implementing new technology or changing payment systems for health professionals or having physicians take on more patients but that will take more money in the short term and as the aftermath of the Romanow Report shows, more money for transformative change does not always get you the change you were looking for.

 

As a result, it is unlikely that we will see any dramatic changes or improvements to Ontario’s public health care system.  Any changes will likely be a short-term response to an immediate problem driven by which affected parties scream the loudest.  Right now, its emergency services but next week it might be driven by headlines in another long-term care home or perhaps a flare-up of monkeypox.  Firefighting driven by the media focus of the moment is not the way to deal with long-term public policy but that seems to be the world we live in.  With a four-year majority mandate and a collapsed opposition, this might be a window of opportunity for more dramatic change in Ontario health care but don’t count on it.  All governments are inherently conservative when it comes to change. No pun intended.

Health Spending in Ontario: Restraint of the 2010s is Over for Now

 

The Canadian Institute for Health Information (CIHI) release of the National Health Expenditure Trends 2021 provides a much awaited first macro snapshot of what happened to Canadian health spending during the COVID-19 pandemic.  Canada is expected to spend a new record of $308 billion on health care in 2021 — $8,019 per Canadian. It is also anticipated that health expenditure will represent 12.7% of Canada’s gross domestic product (GDP) in 2021, following a high of 13.7% in 2020.  A new feature of the numbers this year is the government COVID-19 response funding which in 2021 constitutes 7% of total health spending.  The COVID-19 response funding includes money for treatment costs, testing and contact tracing, vaccination, medical goods, and other related expenses and is a separate category from the standard ones used. 

 

Once one starts to examine and analyze spending both including and excluding the COVID-19 response spending provided, as well as adjusting for inflation and population growth, the picture looks more variable depending on the categories examined, the financing sector considered, and the province involved.  For example, private sector health spending was hit quite hard and categories such as other professionals and hospital spending also saw declines in real per capita spending. 

 

When provincial-territorial government health spending is examined, their real per capita total health spending in 2020 rose 8.1 percent but once the COVID-19 response is factored out their spending declined by about one percent though it is also expected to rebound in 2021.  Hardest hit in provincial-territorial health spending in 2020 in terms of percentage declines in real per capita spending: physicians (-5.8) other professionals (-6.1), drugs (-2.3) and hospitals (-0.5).  Meanwhile, public health grew 4.1 percent, other institutions (including long-term care) grew 1.2 percent while capital spending grew 10 percent.  

 

These results are not unexpected given the decline in surgeries and physician visits brough about by the pandemic. The closing of outpatient departments and postponing of medical visits and procedures during the height of the pandemic meant a reduction in some aspects of health service provision and health spending. According to CIHI’s own analysis of COVID-19’s effect on hospital care services, from March to December 2020, overall surgery numbers fell 22% compared with the same period in 2019, a drop of 413,000 surgeries.

 

 

 

Moreover, real per capita spending growth net of the COVID response funding also varied across provinces in 2020 (See Figure 1).  While Newfoundland and Labrador, Prince Edward Island, New Brunswick, Quebec, Manitoba, Saskatchewan, and Alberta saw a decline in real per capita spending net of COVID-19 response funding, Ontario, British Columbia, and Nova Scotia saw small increases with Ontario the largest at 1.2 percent. New Brunswick, Quebec and Alberta saw the biggest declines in real per capita health spending at -3.3, -3.5 and -3.6 percent respectively.  This demonstrates that during the health system disruption of the pandemic, the decline in service provision at least as measured by real per capita spending, was greater in some provinces relative to others.

 

In 2019, Ontario’s total provincial government health spending was $63.1 billion and in 2020 including the COVID-19 response funding it soared to $72 billion.  In 2021 it is expected to reach $75.2 billion including the COVID funding response. Even when the COVID-19 response is removed, Ontario still saw increases in health spending with provincial government health spending net of COVID forecasted at $67.4 billion in 2020 and $71.7 billion in 2021.  Moreover, these increases continue once adjustments are made for population and inflation.

 

 

Figure 2 plots real per capita provincial government health spending in Ontario in $2020 from 1975 to 2021 calculated from the CIHI data.  Spending growth moderated substantially after 2010.  Whereas the average annual growth rate of real per capita provincial government health spending from 2000 to 2009 averaged 3.1 percent, for the period 2010 to 2019 it grew below 1 percent. However, when COVID-19 spending is factored in, real per capita provincial government spending grew 8.1 percent in 2020 and 2 percent in 2021.  When you factor out the COVID-19 response, the growth rates are 1.2 percent and 3.9 percent respectively.

 

 

Finally, Figure 3 looks at real per capita provincial government health spending growth by major categories.  Hospitals declined in 2019 by 1.2 percent but then grew at 2.1 percent in 2020 and can be expected to grow 1 percent in 2021.  Other institutions (including long-term care) also shrank half a percent in 2019 but then grew 4.4 percent in 2020 and is expected to grow 18.6 percent in 2021.  Physician spending grew 1.8 percent in 2019, then shrank by half a percent in 202 and is expected to rise 1.7 percent in 2021.  Other professionals (e.g., provincially funded dental and optometry) fell 2 percent in 2020 but can be expected to grow 6 percent in 2020. Provincial government drug spending in real per capita terms fell in both 2019 and 2020 but is expected to grow 9 percent in 2021.  Public health saw increases close to 10 percent in each of the three years reported in this chart.  Administration on the hand has shrunk in each year including an 18 percent drop in 2020.

 

So, the impact of the pandemic on provincial government health spending in Ontario after the COVID-19 response has been factored out appears to be a renewed focus on making health a priority at least for the immediate future.  Whereas pre pandemic the focus appears to have been on restraining expenditure growth, the stops are off for the time being.  Whereas real per capita spending growth was under one percent for the 2010s, there is a reversal underway with major increases in other institutions (mainly long-term care), other professionals and drugs.

What Is Federal Health Minister Hajdu Really Up To?

 

Part of the strength of Canada’s political system is its federal structure and the perennial back and forth between Ottawa and the Provinces.  The fact that regional differences are accommodated within a common framework of shared responsibilities is a strength of our system of government and in normal times the endless bickering is really a sign that everyone is still talking.  However, as the recent pandemic has illustrated, during times of crisis the tug of war can be less productive with both Ottawa and the provinces to blame as they engage in short term politics.

 

Here is an old joke.  The UN Secretary-General commissions a report on elephants from all of the member countries.  The United States hands in “How to Raise Elephants for Fun and Profit,” the United Kingdom sends “Should You Invite an Elephant to Tea,” France sends in “The Love Life of the Elephant.” And Canada? Why it sends in “The Elephant: A Federal or Provincial Responsibility.”  That is funny – well at least to some people. “Vaccines: A Federal or Provincial Responsibility?” That is not so funny to anyone given the current spread of COVID-19 variants and the race to vaccinate.

 

So, what’s up with Federal Health Minister Patty Hajdu? All of a sudden, the Federal Health Minister takes to the media with pronouncements that vaccines are having an impact and that the public is anxious about getting their shot but that the provinces (especially Ontario) are not getting the vaccines out fast enough.  Moreover, the Federal Health Minister now plans to monitor that vaccines are being used in a timely fashion after delivery to the provinces and territories and plans to post weekly figures showing how many vaccines have been delivered, and how many have been administered on a province-by-province basis. According to the Health Minister: “I think this is something Canadians want to know. They want to know how efficiently vaccines are getting out the door, and they are also curious when it will be their turn.”

 

Really? A new type of federalism to add to the lexicon: “Watchdog federalism” with the federal government as a large dog that barks constantly but never bites.  After all, the federal government has left the heavy lifting to the provinces when it comes to vaccine delivery aside from negotiating one of the biggest options contracts in Canadian history designed to vaccinate Canadians many times over – eventually.  Why did the federal government not invoke the emergency powers it has under the constitution to invest in its own emergency vaccine production and distribution network?  The UK apparently was able to ramp up production virtually from scratch in nine months – we will get domestic vaccine production in 2027.  The federal government’s reluctance to invoke the emergency act early on to deal with the pandemic in the end was probably political.  After all, it would be the second Trudeau in Canadian history to have invoked the emergency powers of the federal government and how would that play in the next election?

 

It is likely that an election is indeed in the offing.  One wonders if the Federal government’s response to this crisis would have been different if it had been a majority rather than a minority government.  Its actions in dealing with the pandemic always proceeded with a timidity that one could interpret as being more concerned with political optics than getting the job done.  Its lagging behaviour in dealing with the pandemic at the outset was a factor in its spread and Ottawa continues to lag.  It took almost a year for the federal government – which incidentally under the constitution also has the power of quarantine – to set up a quarantining program for returning air travelers and that program is as porous as everything else. Apparently, about of quarter of returning air travelers have been getting exemptions of one form or another.  That probably explains why all three new variants – UK, Brazilian, South African - have gotten a foothold in Canada – the only country to do so.  Furthermore, the delay in March in federally procured vaccine supplies arriving provided a one-month lag in vaccinating ahead of the variants allowing for their foothold to grow.

 

The supply of vaccines has now finally begun to increase. The federal response now? Delivery is a provincial responsibility and they are going to monitor and constantly point out provincial shortfalls rather than do something constructive like send in the military to help vaccinate. Unfortunately, Canadians have the attention span and memory of a fruit fly and if repeated often enough will come to believe that any failures during the pandemic were all the province’s fault – just in time for the next federal election.

 

Ontario’s Spring 2021 Budget: The Future Looks Bleak for Health Care

 

Well, the Ontario 2021 budget came out yesterday and it is rightly preoccupied with the COVID-19 pandemic.  COVID-19 funding and support will continue to flow for the next couple of years and along with the $20.1 billion of support in 2020-21, there will be an additional $6.7 billion and $2.8 billion in the subsequent two years before the government anticipates a return to  some type of normalcy. 

 

For 2020-21, the deficit is estimated at $38.5 billion and for the 2021-22 fiscal year it is expected to be $33.1 billion and then $27.7 billion the year after.   However, the government has actually proposed a fiscal plan for getting to a balanced budget –but it is very long-term.  Deficits are projected to continue falling until 2029-30 when there will finally be a $900 million-dollar surplus – assuming the projections for economic growth and spending take shape and indeed, that the world should last so long.

 

Figure 1 presents the numbers for total revenues, total expenditures and the deficit out to 2029-30 but also puts them into historical perspective.  The numbers are from the Fiscal Reference Tables for the 1990 to 2019 period with GDP numbers from Statistics Canada and the Ontario 2021 Budget for the years after up until 2029. If these projections come to pass, Ontario will have run since 2008-09 a total of 21 budget deficits before reaching “balance” in 2029-30 resulting in accumulated deficits of $284.9 billion.  By 2029, Ontario will be taking in $210.1 billion in revenues – up 35 percent from 2019-20 – and then spending $209.1 billion- up 27% from the same reference point. The net debt that will rise from $397.2 billion in 2020-21 to reach an astounding $585.3 billion by 2029-30 and a net debt to GDP ratio that will remain just short of 50 percent for an entire decade.  Moreover, as the stock of debt rises, so does debt service and its rises from $12.5 billion in 2021-21 to $20.6 billion in 2029-30 – an increase of 65 percent.

 

 

 

It indeed will be the roaring twenties when it comes to the growth of net debt and debt service costs in Ontario.  Ontario’s fastest growing expenditure category from 2021 to 2920 will be debt service costs.  The average annual growth rate for nominal health spending is expected to be 2.6 percent.  Education will grow at an annual average of 1.1 percent, post-secondary education at 1.2 percent, children and social justice comes in at 0.6 percent annually (so much for children as the future) and interest on the debt at 5.1 percent. 

 

The results for health care spending are particularly at odds with the Ford government’s commitment to increasing hospital capacity and long-term care.  While base health spending – that is not including the short-term COVID-19 bump -  is projected to grow at 2.6 percent a year, it means that given population growth of about 1 percent annually and inflation of 2 percent, real per capita spending on health will at best stay flat and even decline somewhat.  

 

This will come after nearly a decade of relatively flat real per capita provincial government health spending in Ontario and it seems to conflict with government claims it is going to boost health and long-term care. We do seem to be heading for a rather dire fiscal future in which the budget is not going to be balanced, the public finances are not sustainable and spending on important things like health will actually decline in real per capita terms.  It is indeed a rather bleak looking future for health care in Ontario despite all the government spin.

Improving Ontario's Public Health Care System

Acting on the advice of the Chief Medical Officer of Health and other health care professionals, the Ontario government has significantly expanded hospital capacity in preparation for any COVID-19 outbreak scenario. The province has added 1,035 acute care beds and 1,492 critical care beds and taken steps to ensure hospitals have the staff available to care for a sudden surge in patients. Based on Ontario’s population and 2017-18 total hospital bed numbers from the CIHI, this should boost the total number of hospital beds per capita in Ontario to 2.5 per 1,000 population.  Moreover, there are plans to add further  capacity in terms of bed numbers.  

 

Expansion of capacity and associated funding to staff those beds is necessary to deal with the COVID-19 outbreak but it is also necessary to deal with future health demand because hospitals in Ontario have seen their per capita hospital bed numbers and real per capita hospital spending stay flat for years. Real per capita provincial government health spending in Ontario from 2000 to 2019 grew 39 percent but growth varied across the health expenditure categories.  Hospitals in Ontario over this period only grew by 14 percent with much of it before 2010 and since 2012 has been essentially flat.  The largest increases were in per capita public health (133 percent), other health spending including home and community based care (101 percent) and drugs (59 percent). 

Across Canada’s ten provinces, Ontario currently has the second lowest number of total hospital beds per 1000 people after Quebec at 2.3 beds per thousand (which will grow to 2.5 with this announcement) with Quebec coming in at 1.9.  Newfoundland comes in the highest at 4.6 beds per thousand followed by New Brunswick at 3.8 and Manitoba, Prince Edward Island and Nova Scotia all tied at 3.4.  Ontario, like many Canadian provinces has developed a “just in time” hospital care system with little spare capacity.  In the past, winter months often saw surges resulting in hallway medicine because of surges in demand from seasonal flu.

Currently the reports are that hospitals in Ontario have been coping well as the anticipated peak surge due to COVID-19 appears to have been held back by the implementation of public health protocols such as physical distancing and shutdowns of activity.  Assuming the additional beds and staffing can be put in place quickly, it better positions Ontario hospitals for any surge in COVID-19 and boosts capacity for the period afterwards.  That is good news because to date the expansion in the current ability to free up beds has been done by rationing access to services.  Essentially, beds have been freed up by sending as many patients as possible home, delaying elective surgeries and postponing deemed non-urgent surgeries.  As well, demand for emergency services is down as people delay going to seek treatment which has ramifications for future need as people put off seeking medical care.

Given that we may be nearing a slowing down in the growth rate of total confirmed cases in Ontario Covid-19 cases, I think the ability of the health care system to deal with Covid-19 will be even more secure especially as more beds come on stream and supplies of critical materials and PPEs increase.  This will hopefully result in hospitals starting to resume dealing with elective and non-urgent surgeries and their usual diagnostic testing services given that almost all of this has been put on hold.  The postponing of other health procedures is detrimental to the long-term health of many Ontarians and is an additional cost of the Covid-19 pandemic in terms of both its potential effects on general future mortality and morbidity as well as future health care costs.  

Running a “just in time” public health care system at capacity with most activity – diagnostic, acute care, surgeries and emergency services - mainly concentrated at large centralized hospitals will need to be revisited.  We need a more resilient health care sector that able to cope with surges in demand in crisis situations as well as continue to provide other needed health services.  One can hope that in future, along with a reinvestment in hospital capacity and proper maintenance of public health equipment stockpiles, one will see an expansion of broader function “Urgent Care Centers” across the province that will provide a range of emergency type services outside of hospital settings as well as more decentralized diagnostic clinical centers that are able to do minor elective procedures outside of a major hospital setting.  The current approach to the health care system in Ontario is essentially akin to putting all your eggs in a very small and fragile basket.

Mortality in the North

Ontario’s Health Quality Council has just released a new report on Health Equity in northern Ontario that shows that Ontario’s northern regions lag behind provincial averages in quality of health and health care.  The geographic focus of the report is on the area that “extends north of Lake Huron to Hudson Bay and James Bay, and from the Quebec border in the east to the Manitoba border in the west, which represent nearly 80% of Ontario’s landmass.”  If you do not want to read the report, there is a pretty good overview in the Globe and Mail.

While northern Ontario has seen health gains over time, it remains that the gap in health indicators between the north and the south is growing and it may be worse than the report suggests because the report’s data is drawn from Statistics Canada’s Community Health Survey, which does not cover Indigenous people living on reserves.  As it stands, the relative gap in mortality rates has grown to 30 percent in 2012 from a 12-17 percent range in 1992.  In 2012, the age standardized mortality rate per 1,000 people was 5.7 in the northwest, 5.7 in the northeast and 4.4 in Ontario.

People in the North West LHIN region have a life expectancy of 78.6 years, compared to 81.5 years in Ontario. People in the North East LHIN region also have a markedly lower life expectancy than Ontario overall, of 79.0 years, or 2.5 years shorter than the Ontario average. The North West LHIN region has nearly double Ontario’s number of potential years of life lost due to avoidable deaths, at 6,023 years lost per 100,000 people over a two-year period, compared to 3,243 years per 100,000 people in Ontario. The North East LHIN region also has considerably higher potential years of life lost due to avoidable deaths than Ontario, at 4,763 years per 100,000 people. People in northern Ontario are more likely to die prematurely due to suicide, circulatory and respiratory disease.

The reasons for these differences are complex.  The north is a sparsely populated region and the vast differences make it difficult to deliver the same level of care one might get in Toronto to smaller isolated communities.  There are also lifestyle factors such as higher smoking, drinking and obesity rates in the north.  For example, the self-reported smoking rate was 26.0% in the North East LHIN region and 22.9% in the North West LHIN region, compared to 17.3% in Ontario.

However, access is also still an an issue.  According to the report: “People in the north are less likely than Ontarians as a whole to report having a family doctor, nurse practitioner or other regular health care provider – 89.2% of people in the North East LHIN region and 83.8% in the North West LHIN region, compared to 93.8% of people in Ontario.”  The Globe and Mail story quotes NDP health critic Frances Gélinas as saying that part of the blame for health-quality gaps between the north and south lies with the Liberal government’s move to concentrate health services and surgeries in “centres of excellence” in big cities in the south.

To that, let me add the following anecdotal observation.  Its not just centralization in the south that may be affecting access to health care in northern Ontario but also concentration of health services and facilities within the north’s few major urban centers themselves.  Take the case of Thunder Bay since the new centralized hospital and new medical school were put into place over a decade ago, there has been a steady migration of health services and facilities to the area around the new hospital on the north side of the city.  Indeed, even the Fort William Clinic is now technically in what used to be the old City of Port Arthur.  Twenty years ago, hospitals, diagnostic facilities and clinics appeared to be much more dispersed across the city’s two north-south population clusters. 

I would like to see a study of if there has been any impact on access to medical services and access particularly for those on the south side of the city to physician visits and diagnostic tests.  Especially, how have seniors with limited mobility and lower income people on the south side continued to access physician appointments and tests.  Do they have a higher rate of cancellation?  Would the south side benefit from having an Urgent Care Access Center like the types that have been springing up in southern Ontario cities? Perhaps there has been no change but I would like to see some evidence based results because my gut feeling is that it is much harder to access care even in the north’s larger urban centers and the result is fewer people going to see doctors and getting tests.  Moreover, those most likely to not make it to the doctor may be among more vulnerable populations. However, gut feelings are not enough to make policy. We need evidence.