Chronic Healthcare Spending Disease: A Macro Diagnosis and Prognosis

Abstract

The amount Canadians spend on healthcare is set to rise rapidly over the next two decades and Canadians need to face up to tough choices to deal with this “spending disease.” The study examines the trajectory of total healthcare spending – public and private – in Canada and the policy choices Canadians must make in response. The authors estimate the extent to which healthcare spending is going to absorb a greater fraction of income than Canadians have experienced to date under two scenarios: a baseline scenario drawn from historical experience, and an optimistic scenario, which assumes an unprecedented improvement in the efficiency and effectiveness of the healthcare system and large improvement in potential economic growth. Canadians must choose some combination of: 1) a sharp reduction in public services, other than health care; 2) increased taxes to finance the public share of healthcare spending; 3) increased individual spending on healthcare services currently insured by provinces, through some form of co-payment or through delisting of services that are currently publicly financed; 4) or a degradation of publicly insured healthcare standards – longer queues, and services of poorer quality.

Keywords: The Health Papers, healthcare spending, Canada

JEL Classification: H51, H60, H61, I00