Government health care spending, and how much seniors account for

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Why do some provinces spend much more than others on health care?

When it comes to Canada's sparsely populated territories, the explanation is easy: It costs more per person to care for patients in the far-flung rural communities of Yukon ($10,044 per capita), Northwest Territories ($12,160) and Nunavut ($13,160.)

But what explains the difference between the top two provinces in spending per capita – Newfoundland and Labrador ($6,953) and Alberta ($6,783) – and the lowest spender, Quebec ($5,616)?

"Part of the difference is rooted in the ability to pay," said Livio Di Matteo, an economics professor at Lakehead University in Thunder Bay. "Some provinces have higher per-capita GDPs and government revenues and therefore can afford more health care. Alberta and Newfoundland, for example, have the highest per-capita spending and they have been enjoying the benefits of a resource boom."

Quebec, on the other hand, not only spends the lowest amount on health care per person, it also spends the least as a percentage of its total budget. Health care accounts for 30 per cent of total spending, compared, for instance, with 41 per cent in neighbouring Ontario.

The reason? Doctors and nurses are paid less in Quebec than in other provinces. "One hypothesis is that francophone health-care workers are less likely to emigrate south than their anglophone counterparts in the [rest of Canada] and, as a result, provincial governments in Quebec are competing less with the silly prices insurers are willing to pay in the U.S.," said Michel Grignon, director of the Centre for Health Economics and Policy Analysis at McMaster University in Hamilton.

Why do seniors account for so little of the annual spending increase?

So far, the aging of Canada's population has been gradual, allowing the health-care system time to adjust. "It's popular in the media to be really worried about the grey tsunami," said Colleen Flood, a University of Ottawa law professor who specializes in health policy, "but it's not like this massive spike that hits the system at any one time."

The Canadian Institute for Health Information report found that the aging of the population is only a modest cost driver, expected to be responsible for 0.9 per cent of the health-care spending increase this year. The proportion of health-care spending dedicated to seniors actually held nearly steady at around 45 per cent between 2002 and 2012, even as the percentage of seniors in the population grew from 12.5 per cent to 14.9 per cent.

"There certainly is an aging effect," said Brent Diverty, the vice-president for programs at the institute. "But what we also see is that overall population growth and the effects of inflation, which in 2014 we estimate at about 3 per cent, are having a much stronger impact."

The aging effect could become more pronounced in 10 or 15 years, when baby boomers enter their mid-to-late 70s – the age at which an individual's cost to the system begins to rise dramatically, according to the report. (The other stage of life that costs the system a lot is infancy.)

How does Canada stack up against other countries?

Canada spends more on health care than the average for Organization for Economic Co-operation and Development member countries, but not by much. Average annual health spending in the 34 industrialized countries was $3,590 per capita in 2012, or 9.4 per cent of gross domestic product.

Canada spent $4,602 per capita that year, or 10.9 per cent of GDP, on health-care.

The CIHI report looked at only how health-care dollars are spent, not whether Canadians are getting good value for their money. But past studies have judged Canada poorly on that front. In June, the U.S.-based Commonwealth Fund ranked Canada second-to-last on a comparative score card of 11 health-care systems.

Only the American system fared worse. In 2012, the U.S. spent $8,745 per capita or 16.9 per cent of GDP on health care, vastly outstripping other OECD countries.