The cost of health care in Canada has been rising faster than inflation since the 1970s, even after we adjust for population growth.
When health care spending continually outpaces GDP growth, it becomes a cause for alarm. At some point, it restricts how much our governments can spend on other initiatives, such as infrastructure, education and daycare, among other things.
This week’s first chart shows that health care spending has soared to 12.7 per cent of GDP today from 7 per cent of GDP in 1975, and it is not because of COVID. We can attribute some of this increase to improvements in medical technology and an aging population.
As the second chart shows, however, another reason might be runaway spending on the oldest age groups. We spend nearly eight times as much on those 85 and over as we do on 50-year-olds.
This is not to suggest that we are spending too much on the oldest and frailest of our fellow Canadians. But let me emphasize this spending comes at a cost that affects everyone, from six-hour waits in emergency departments, to six-month waits for surgery, to our ability to continue to invest in advanced medical technology.
Moreover, spending at this level for the oldest demographic is not the global norm. As one international study shows, no other country – other than the U.S. – comes close to what Canada spends. (Healthcare Spending: What the Future Will Look Like, C. Hagist and L. Kotlikoff, 2006). More typically, developed countries spend about four times as much on those 85 and over.
Inertia is a powerful force and the most likely course of action for politicians and hospitals is to continue as we are. Given that our population continues to age, however, this will simply make matters worse. We will delve into this further in subsequent charts.
Frederick Vettese is former chief actuary of Morneau Shepell and author of the PERC retirement calculator.
