Healthcare spending in Canada has steadily increased over the past few decades. As a share of GDP, healthcare spending has risen from 7% in 1975 to 11.5% in 2019. In dollar amounts, national healthcare expenditures have gone from $39 billion in 1975 to $265 billion in 2019. This upward trajectory is placing unsustainable pressure on provincial budgets and raising concerns about the future funding of Canada’s public healthcare system.
Several factors are driving the rising costs of healthcare in Canada. An aging population requiring more care, expensive new technologies and drugs, increased chronic disease rates, administrative inefficiencies, and more have all contributed to escalating healthcare costs across the country. As costs continue to climb, innovating how we deliver healthcare will be crucial to ensuring fiscal sustainability.
Key Factors Behind Rising Healthcare Costs
1. The Aging Population
Canada’s aging population is a significant demographic factor making healthcare more expensive. Seniors have higher per capita healthcare costs, as they are more likely to have chronic illnesses and require hospitalization. As the giant baby boom cohort moves into old age, the number of senior citizens is growing rapidly. By 2030, over 23% of Canadians will be 65 and older. Caring for this older population will place increasing strain on the healthcare system.
2. New Technologies and Drugs
State-of-the-art medical technologies, equipment and prescription drugs are pricier to acquire and use. Canadian hospitals and clinics are adopting advanced technologies like MRI machines, digital health records, and AI diagnostics that improve healthcare but have hefty upfront costs. New brand-name prescription drugs are also expensive, with costs rising faster than other healthcare expenditures.
3. Chronic Disease Rates
Rising rates of chronic illnesses like diabetes, heart disease, dementia and cancer mean healthcare usage and costs stay elevated over long periods for these patients. More than half of Canadian adults now have at least one chronic health condition. Caring for individuals with lifelong chronic diseases requires regular doctor visits, medications, and diagnostic tests.
4. Administration and Compensation Costs
Administrative inefficiencies and rising healthcare employee compensation costs are also pushing healthcare spending higher in Canada. Administrative costs account for approximately 30% of total expenditures, indicating potential waste. Salaries and benefits for nurses, physicians and other healthcare workers have also significantly increased.
5. Lack of Alternative Healthcare Models
Canada relies predominantly on hospitals and physician services for healthcare delivery. Alternative models like integrated care clinics, nurse practitioners, and preventative healthcare are underutilized. Diversifying how we provide care could improve efficiency and reduce costs.
Impacts and Concerns of Rising Healthcare Costs
Rising healthcare expenditures have several concerning impacts:
- Provincial budgets are becoming overburdened by healthcare costs, crowding out other spending priorities like education, infrastructure and social services.
- Governments and individuals pay higher taxes and insurance premiums to fund healthcare.
- Hospitals are challenged to provide quality care within budget constraints.
- Some physicians no longer accept new patients due to capped payment models.
- Canadians face long wait times for elective surgeries, MRIs and specialist visits.
- There are fears Canada’s revered public healthcare system may become unsustainable without reforms.
Unless costs are controlled, according to some estimates, healthcare spending could reach an alarming 20% of GDP by 2040. Measures must be taken to curve the trajectory of healthcare costs in Canada.
Strategies for Reducing Healthcare Costs
Moderating the growth in healthcare spending while maintaining quality will require a multi-pronged strategy. Possible cost management approaches include:
- Promoting wellness and preventative care to improve health outcomes and avoid unnecessary treatment spending later on.
- Managing chronic diseases better through education, monitoring, medication compliance, and access to multidisciplinary care teams.
- Increasing long-term care facilities and home care services so seniors can stay independent and avoid hospital visits longer.
- Reducing administrative bloat through digitalization, centralized purchasing, and patient-focused reorganization.
- Capping increases in healthcare worker wages and fees for doctors through negotiated agreements.
- Evaluating and adopting cost-effective new medical technologies cautiously.
- Shifting away from sole reliance on fee-for-service models that incentivize volume over quality.
- Integrating care with multi-disciplinary teams and facilities that can treat the whole patient efficiently under one roof.
- Utilizing more nurse practitioners, pharmacists and paramedics to reduce reliance on higher-cost physicians.
The solution will require shared sacrifices — from healthcare workers, doctors, governments, taxpayers and patients. But by innovating how we deliver and fund healthcare, Canada can successfully meet the challenge of rising costs.
Key Facts on Rising Healthcare Costs in Canada
- Healthcare spending as a share of GDP increased from 7% to 11.5% over the past 45 years
- National healthcare expenditures rose from $39 billion in 1975 to $265 billion in 2019.
- An aging population is requiring much more healthcare.
- New medical technologies and prescription drugs are costly.
- Chronic disease rates are rising significantly.
- Administration accounts for 30% of healthcare costs.
- Hospital-centric models have inefficiently driven up costs.
- Provincial healthcare budgets are becoming unsustainable.
- Canadians face long wait times as costs rise.
- Wellness, preventative care and chronic disease management are essential.
- Administrative streamlining, compensation controls and care integration are needed.
Canadian Institute for Health Information. “Health Spending.” 2021. https://www.cihi.ca/en/health-spending
Michael Wolfson. “Health policy: reversing the growth of health-care spending.” Parliamentary Budget Office. 2019. https://www.pbo-dpb.gc.ca/web/default/files/Documents/Reports/2019/HealthReversingGrowth/Health_Policy_EN_2019_2.pdf
Fares Bounajm et al. “Expenditure on health care in the Canadian provinces.” CIHI. 2009. https://secure.cihi.ca/free_products/Expenditure_on_Health_Care_in_the_Canadian_Provinces_2009_en.pdf
M. Gregory Blodgett et al. “Canadian health policy failures: what’s wrong? Who gets hurt? What’s being done?” J Health Serv Res Policy. 2005. https://journals.sagepub.com/doi/full/10.1258/135581905774414228