Government Budget Overruns Cast Doubt on Reports of Sustainable Healthcare Spending

Canadians should hold off on declaring a slowdown in government healthcare spending to sustainable growth rates, says a C.D. Howe Institute report released today. In “Bending Canada’s Healthcare Cost Curve: Watch Not What Governments Say, But What They Do,” author William B.P. Robson finds that reports of slower growth in healthcare spending have been repeatedly wrong-footed by chronic budget overshoots. So recent estimates that healthcare spending is no longer growing faster than the economy may also prove optimistic.

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Robson looks at the annual spending reports from the Canadian Institute for Healthcare Information (CIHI), which have repeatedly shown slower growth in healthcare spending by provincial and territorial governments. "The problem," says Robson, "is that the reports rely on government budget estimates for the current and immediately preceding years' figures. When the actual numbers come in, they tend to show significantly higher spending. Governments have slowed healthcare spending in recent years. But to be fiscally sustainable, it has to be in line with growth in the economy, and until we see the final numbers, we can't conclude we have succeeded.” Upward revisions to initially estimated provincial and territorial healthcare spending since 1998 have been just about a universal experience. While they were negligible in Manitoba and in British Columbia, they were substantial in several eastern and prairie provinces, and huge in the territories. For the country as a whole, the average annual upward revision between initial estimates of healthcare spending and the final numbers was almost 1 percentage point - a difference that could decisively affect judgements about whether its trend is now in line with, or above, growth in Canadian GDP. The history of healthcare spending overruns by provincial and territorial governments means Canadians must wait for the final numbers before concluding that public healthcare spending is growing at a sustainable rate. “The preliminary numbers are what governments say," Robson points out. "What matters for the sustainability of publicly funded healthcare in Canada is what they do.” The C. D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies. It is Canada’s trusted source of essential policy intelligence, distinguished by research that is nonpartisan, evidence-based and subject to definitive expert review. It is considered by many to be Canada’s most influential think tank. For the report, click here: