Understanding future pressures on health spending

The Alberta government wants you to believe that public health care is unsustainable. They say that the cost of health care is being driven relentlessly upwards by a number of factors such as rising labour costs, new medical technologies and the aging population. The government concludes that these so-called "cost drivers" will make it impossible for us to afford Medicare in its current form.

On the surface, these arguments seem to present a persuasive case for fundamental health care reform. But there's one big problem - the government has its facts wrong. The evidence clearly shows that the "cost drivers" identified by the government and the Mazankowski commission don't pose as great a threat to the health budget as we've been led to believe.

Here's the real scoop on future trends in health spending:

The Aging Population:

The government suggests that health care costs will increase dramatically as the "baby boomers" age. This conclusion is based on the notion that elderly people are all frail and sick. But the reality is that seniors are aging much more healthfully now than ever before. As a result, the coming generation of elderly Canadians will place a proportionately smaller burden on the health care system than current and previous generations. In fact, the consensus among Canadian health researchers is that the aging population will contribute only about 1 extra percentage point to overall health spending each year for the foreseeable future. Even this figure can probably be reduced by investing more in health promotion and homecare - efforts that would reduce the need among seniors for expensive hospital stays.

Rising Labour Costs:

It's true that many health care workers have received seemingly substantial wage increases over the past few years. But these contract settlements have to be put in the proper context. For most of the 90s public sector wages were either stagnant or falling (remember the five- percent rollbacks of 1995). So the wage settlements of 2000 and 2001 have been more about playing catch-up than making substantial gains. Even the nurses, who received bigger wages increases than most other health workers in Alberta, are receiving only about 10 percent more (after inflation) than they did a decade ago. Real wages for most other health care worker have remained stable.

New Technologies, Drugs and Procedures:

The government raises the spectre of "expensive new technologies and drugs" that will drive up the cost of health care. We at the AFL agree that the cost of drugs has been rising at an unacceptable rate. And we support the call for cooperation between provinces to deal with the problem. However, we cannot accept the suggestion that all new drugs and technologies cause spending to increase. In fact, many new procedures and technologies actually reduce costs and save the health care system money. MRIs, for example, can enhance the ability of doctors to diagnose patients and zero-in on appropriate treatment strategies. And procedures like fibre-optic endoscopic surgery have turned what used to be costly surgeries with long convalescent periods into relatively inexpensive day procedures. Many new drugs have also reduced the need for costly hospital stays. Clearly, medical innovations can sometimes cost money - but very often they can also help control costs.

Conclusions: Based on the evidence, it's clear that there are a number of factors placing upward pressure on health spending in Canada - chief among them drug costs and the costs associated with building and maintaining our health care infrastructure. However, there is no evidence that health care costs are spiraling out of control as many critics and conservative politicians have argued. Action is needed to address specific concerns like rising drug costs. But there is no reason to believe that Medicare is unsustainable - and there is certainly no evidence to justify abandoning the system or dismantling the protections outlined in the Canada Health Act.

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