AN UNSTABLE SYSTEM
March 11, 2008
Government health care as it is currently structured in Canada is not financially sustainable, according to "Paying More, Getting Less," an annual report from the Fraser Institute.
- Health spending has been growing at an unsustainable pace in 9 of 10 provinces.
- Government health spending in 6 of 10 provinces is on pace to consume more than half of total revenue from all sources by 2035.
- Averaged nationally across all provinces, health spending has risen by 7.3 percent over a 10-year period, while the national average growth rate of total available provincial revenue has only been 5.9 percent.
- Moreover, health spending has grown faster than provincial gross domestic product (GDP), which average only a 5.6 percent growth annual across provinces in the same period.
Fraser found that even in provinces benefiting from inflated energy costs such as resource rich Alberta, British Columbia, Saskatchewan, Newfoundland and Labrador, growth in health care spending still has out paced growth in GDP and total available provincial revenue.
In some provinces, revenue growth has been temporarily accelerated by unsustainable and counter-productive recent increases in the tax burden:
- Ontario introduced an income surtax to pay for health care, which increased the provincial revenue base by nearly $2.5 billion.
- Research by author Brett Skinner has demonstrated that the province cannot reasonably expect to increase revenue growth by the same rate each year through such measures without incurring significant and political economic and political consequences.
An increase in demand for health services without an equivalent increase in the ability to pay inevitably leads to government rationing, says Fraser.
Source: Brett Skinner and Mark Rovere, "An Unstable System," Fraser Forum, February 2008; based upon: Brett Skinner and Mark Rovere, "Paying More, Getting Less 2007," Fraser Institute, December 3, 2007.
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