(Image Credit: flickr account KMR Photography; the image is at this link. Used without modification under Creative Commons Licence)
Many Canadians are convinced that the shortcomings of our healthcare system are primarily – if not solely – due to insufficient funding. But official data shows that this is not so & hasn’t been in a long while.
ACTION & REACTION
After I posted my article ‘Canada’s Healthcare Crisis’, I found many Canadians offering the opinion that this crisis is primarily – or even solely – due to different governments not providing enough funding for the purpose. As can be expected, their view of exactly which government was ‘guilty’ in this regard fell neatly along partisan lines. This was disappointing; in my article, I had pointed out that this approach was an obstacle in our quest for improvements in the healthcare system. I had provided a link to data from Canadian Institute of Health Information (CIHI) that shows the increases in funding over decades.
A few people avoided the partisan route and did contend that all governments had been equally responsible. But their baseline was still that the funding was inadequate.
In the past 4+ weeks, I have offered the data many times to many people showing that the funding has not been inadequate. In order to help me to reproduce this information quickly and in a collected format, I thought of writing this article.
Here, I should point out that healthcare funding did drop in the 1990’s, from 9.8% of GDP in 1992 to 8.7% in 1997, and again in the 2010’s, from 11.6% of GDP in 2010 to 10.9% in 2014. The economic crises that Canada faced in these periods is well-known, so I will refrain from detailing the factors behind this drop in healthcare funding.
My main point here is that healthcare funding has generally outpaced both population growth and inflation for over 4.5 decades – and yet the widely shared opinion persists that the system is chronically underfunded. This is in stark contrast to the other, equally entrenched belief that we have the ‘best healthcare system in the world’.
Crucially, the Venn diagram of the people holding these respective beliefs is likely to show a sizable overlap between the two circles; these are the Canadians who are convinced that our healthcare system is simultaneously the best in the world and chronically underfunded. I believe it is necessary to show that both the beliefs are untrue; that is the only way to rid them of this cognitive dissonance.
VIEWS FROM ABOVE
One reason why so many people hold the view that our healthcare system is currently underfunded is that senior journalists, analysts and opinion-makers keep making this (erroneous) claim from time to time.
For example, Warren Kinsella, former advisor to Prime Minister Jean Chretien and currently a prominent voice on politics & public policy, wrote an article in the Toronto Sun on January 05 in which he said that:
“More than perhaps at any other time in our 155-year history, we need to properly fund healthcare.”
Interestingly, Mr. Kinsella offers this opinion despite having said, earlier in the article, the following:
“And in the decade leading up to the pandemic, provincial healthcare spending grew by nearly 120%. That’s a formula for bankruptcy.” (Emphasis added)
In a nutshell, the two positions taken by Mr. Kinsella in the same article are at odds with each other.
Elsewhere, semi-retired senior journalist Charles Adler tweeted a thread in which he said that:
“The main reason why large parts of the country, including Ontario and Quebec, are repeatedly being put into severe lockdowns compared to other comparable, developed countries is due to the chronic lack of surge capacity in our hospitals, due to a combination of decades or (sic) provincial & federal gov’t underfunding and administrative incompetence.” (Emphasis added)
(I am unable to provide a link to this tweet because Mr. Adler blocked me on Twitter long ago, after I asked him a question in reply to a tweet of his. A friend provided me with screenshots of his tweet-thread where he said the above. You may check out his thread at his Twitter account @charlesadler.)
Since these two gentlemen (and many other people like them) have been around in the journalism / policy / punditry business for many decades, their remarks about the ‘underfunding’ of our healthcare system go unchallenged, especially when these are sub-points in an overall point that they are seeking to make. To their readers, it becomes a premise that the system is ‘underfunded’, and their further understanding on the subject is shaped by this premise.
Let’s now look at the data on the subject. They are from Canadian Institute of Health Information (CIHI), StatsCan and OECD.
To the extent possible, I will also be reproducing the charts from these sources in addition to the links, to save the readers from the effort of clicking on the links.
First, let us look at the chart of Canada’s healthcare spending as a percentage of GDP (source: CIHI report at this link; the chart is at Page 8 of the report):
As we can see, spending on healthcare rose from 7.0% of GDP in 1975 to 11.6% in 2019.
Moreover, according to another (later) CIHI report, this spending rose further to 12.7% of GDP in 2021 (see this link), to a dollar figure of $308 Billion. (We will revisit this datum further down this article.)
The first CIHI report cited above also presents a graph of the healthcare spending in dollar terms, both current dollars as well as constant (i.e., inflation-adjusted) dollars. The base year for constant dollars is taken at 1997 (which is the exact mid-way point between 1975 and 2019). This chart is at Page 6 of the report:
Here, it is worth checking if this increase has kept pace with population growth, or lagged that growth, or run ahead of it.
The population of Canada was 23.14 million in 1975, and rose to 37.59 million by 2019 (see this and this link), representing a growth of 62.45%.
Even a cursory look at the spending in constant dollars (the orange line in the above chart) reveals that growth in our healthcare spending was many times that. Spending in current (or nominal) dollar terms has galloped away by an even wider margin, but that’s just inflation playing its usual optical trick on your eyes.
Let us see a year-by-year picture of inflation-adjusted spending on healthcare (Page 9 of the CIHI report):
As we can see clearly, barring two specific periods of immense economic stress (the national debt rating crisis of the 1990’s and the post-global-financial-meltdown period after 2008-2009), growth in our healthcare spending has always kept ahead of inflation – although it has to be admitted that the average annual growth rate has been markedly lower in the last phase (2015-2019).
COMPARING WITH THE JONES’S
Let’s now look at how our healthcare spending compares with other countries.
The following chart from OECD (see this link) shows Canada at the #13 position in a list of 48 countries:
(The solid dots represent total spending per capita, while the diamond shape is for the government/ compulsory portion and the cross mark is for voluntary spending.)
If we want to compare with the OECD average, then the figures are 11.6% of GDP for Canada in 2019 (as we saw in the CIHI report earlier) v/s 8.8% for the OECD in the same year (see text at the left in the following chart).
In the era of Covid, the disparity has decreased marginally; while the estimated OECD average rose to 9.9% of GDP (see the chart below from this link), the corresponding number for Canada is estimated at 12.7% (as we saw earlier at the CIHI link).
This means that instead of spending at 31.8% higher than OECD average (which was the case for 2019), we will now have spent at 28.3% higher rate in 2021.
BURYING THE HATCHET
As the data shows, it is simply not true that the Canadian healthcare system is underfunded – although two specific periods of economic hardship did cause the funding to be reduced temporarily. Whatever complaints that we may have on the healthcare front can be addressed more fruitfully if we are able to surmount this perennial obstacle of an argument.
As the adage goes, the first step to resolving a problem consists of acknowledging that we have one. My contention is that our problem here is inefficient spending coupled with the bureaucratic chokehold of an administrative apparatus that controls who gets served when, and how much the entity providing the service gets paid for the service. I touched upon this in my earlier article ‘Delayed Delivery’ – but just as I realized that the ‘underfunding’ argument needed a separate explanation, similarly I am becoming convinced that the faulty-by-design malfunctioning of the delivery mechanism connecting the supply of medical services to the demand for them is going to need a separate article (and perhaps more than one article).
Fortunately, I have been given some valuable sources for this inquiry by people who have first-hand experience of interacting with this mechanism. In the coming days, I will start my exploration of that side of our healthcare problem.
What do I mean by this ‘faulty delivery mechanism’?
Here is a chart from StatsCan (see this link):
My obvious questions (as I am sure they are yours) from looking at this chart are: What is ‘Mortality from preventable & treatable causes’? And why do we have them?
I will return to this topic once I have more to say on it.