Given Canada's slowing economy, faltering government revenues, and uncertainty about Federal equalization payments, 2009 could be a tumultuous year in the province's health sector. Manitoba's Health Minister Theresa Oswald recently remarked that if the province slips deeper into a recession, some of the recent gains that have been made in the health-care system could be undone. While any funding crisis will conveniently coincide with a recession, we should not let government divert us from the reality that the roots of the issue are long-term. Despite the Romanow Report and the Health Accord that brought billions of dollars in new health funding to buy change, it would appear that all that has been purchased is quiet time rather than a permanent solution to health care sustainability. The inexorable forces of health expenditure in Manitoba, as in other provinces, have eaten up the increases and begun to move on.
Fiscal sustainability means having the money to pay for what you want to do both now and in the future. A working definition of fiscally sustainable public health spending is one in which the health needs of all members of the population can be met with current revenue and expenditure mechanisms such that increases in spending match increases in the resource base. Yet, an examination of Manitoba's long-term health care spending suggests that it has been outstripping the ability to pay for decades.
In 1965, Manitoba's provincial government was spending approximately 416 real per capita dollars (1997 dollars) on health care and by 2008 it reached 2,700 dollars. This represents a more than six-fold increase since 1965. Moreover, as a share of the province's GDP, provincial government health spending now accounts for nearly nine per cent of the economy, up from three per cent in 1965. Key drivers of this increase have been technological change and the demand for new procedures including drugs and improved diagnostics, rising costs for services, and an aging population.
The picture for health spending is even more startling if one looks at separate health expenditure categories. Real per capita provincial government health spending on drugs, public health, capital spending and home care have all grown much faster than the average, suggesting the main drivers of the provincial health expenditure increase in Manitoba is these other categories rather than categories such as hospitals or physicians.
How does the increased spending on health compare with Manitoba's resource base? Since 1965, the annual growth rate for real per capita provincial government health spending averaged five per cent -- above the growth rate for real per capita total provincial government spending of four per cent
The annual growth rate of real per capita GDP on the other hand only averaged two per cent. Meanwhile, the average annual growth rate of real per capita provincial government revenues since 1965 is four per cent.
In each case, provincial government health spending per person outstripped growth in these standard measures of the resource base per person. The gap is even larger when some of the separate health expenditure categories such as drugs are considered.
More spending on health ultimately means less spending for other government areas and the share of total provincial government spending on health was about 30 per cent in the 1960s and is now over 40 per cent.
On the one hand, spending on health is a public policy choice and if Manitobans are happy spending more of their provincial budget on health then in some sense there is no policy issue. Indeed, any pre-budget lamentations of various provincial health interest groups becomes a ritual designed to generate public support for increases in the health care budget which ultimately must come at the expense of growth in other areas.
Health care makes the best claim for an increased share of resources given our visceral collective terror of illness and death.
On the other hand, health cannot grow faster than other government expenditure categories and the revenue base forever. At some future point, tougher decisions about sustainability will need to be made.
The options are fairly simple. Reduce expenditure growth via outright cuts or delivery reforms, boost provincial government revenues via tax increases, obtain more federal transfers or boost the economy's overall growth rate to broaden the tax base. While the options are simple, implementing them never is and we can look forward to more years of reports of underfunding and deficits in the province's heath care system.
Livio Di Matteo is professor of economics at Lakehead University and specializes in health economics, public policy and economic history.