Health Care in Canada - Economics

Economics

The amount Canadians spend on health care in 1997 dollars has increased every year between 1975 and 2009 from $39.7 billion to $137.3 billion or a more than doubling of per capita spending from $1,715 to $4089. In 2009 dollars spending is expected to reach $183.1 billion ( a more than five percent increase over the previous year ) or $5,452 per person. Most of this increase in health care costs has been covered by public funds. The greatest proportion of this money goes to hospitals ($51B), followed by pharmaceuticals ($30B), and physicians ($26B). Total spending in 2007 was equivalent to 10.1% of the gross domestic product which was slightly above the average for OECD countries, and below the 16.0% of GDP spent on health care in the United States. The proportion spent on hospitals and physicians has declined between 1975 and 2009 while the amount spent on pharmaceuticals has increased.

Of the three biggest health care expenses, the amount spent on pharmaceuticals has increased the most. In 1997 the total price of drugs surpassed that of doctors. In 1975 the three biggest health costs were hospitals ($5.5B/44.7%), physicians ($1.8B/15.1% ), and medications ($1.1B/8.8% ) while in 2007 the three biggest costs were hospitals ($45.4B/28.2% ), medications ($26.5B/16.5% ), and physicians ($21.5B/13.4% ).

In 2009, the government funded about 70% of Canadians' health care costs. This covered most hospital and physician cost while the dental and pharmaceutical costs were primarily paid for by individuals. This is slightly below the OECD average. Under the terms of the Canada Health Act, public funding is required to pay for medically necessary care, but only if it is delivered in hospitals or by physicians. There is considerable variation across the provinces/territories as to the extent to which such costs as out of hospital prescription medications, physical therapy, long-term care, dental care and ambulance services are covered.

Canada has a publicly funded medicare system, with most services provided by the private sector. Each province may opt out, though none currently do. Canada's system is known as a single payer system, where basic services are provided by private doctors (since 2002 they have been allowed to incorporate), with the entire fee paid for by the government at the same rate. Most government funding (94%) comes from the provincial level. Most family doctors receive a fee per visit. These rates are negotiated between the provincial governments and the province's medical associations, usually on an annual basis. Pharmaceutical costs are set at a global median by government price controls.

Hospital care is delivered by publicly funded hospitals in Canada. Most of the public hospitals, each of which are independent institutions incorporated under provincial Corporations Acts, are required by law to operate within their budget. Amalgamation of hospitals in the 1990s has reduced competition between hospitals. As the cost of patient care has increased, hospitals have been forced to cut costs or reduce services. Applying perspective (pharmacoeconomic) to analyze cost reduction, it has been shown that savings made by individual hospitals result in actual cost increases to the Provinces.

Health care costs per capita vary across Canada with Quebec ($4,891) and British Columbia ($5,254) at the lowest level and Alberta ($6,072) and Newfoundland ($5,970) at the highest. It is also the greatest at the extremes of age at a cost of $17,469 per capita in those older than 80 and $8,239 for those less than 1 year old in comparison to $3,809 for those between 1 and 64 years old in 2007.