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Provincial and territorial governments must hit their budget targets better to make publicly funded healthcare fiscally sustainable, warns a new report from the C.D. Howe Institute.

In “There is No Try: Sustainable Healthcare Requires Reining in Spending Overshoots,” William B.P. Robson compares the preliminary and later numbers in National Health Expenditure (NHEX) reports from the Canadian Institute for Health Information from 1998 – 2019. He points out that the gap between the preliminary numbers based on budgets and estimates, and the later numbers based on actual spending, has averaged 0.9 percent annually.

Overshoots that large – across the country over time – affect judgements about the fiscal sustainability of publicly funded healthcare. For example, Robson notes that the 2019 NHEX report showed preliminary growth of provincial and territorial governments’ healthcare spending of 3.7 percent – in line with most estimates of potential GDP growth. Add the 0.9 percent overshoot typical of past experience, however, and 2019 growth will turn out to be 4.6 percent –faster than the economy can grow over the long term. Sustained over time, that growth rate threatens some combination of rising taxes more borrowing, and squeezes on other government programs.

Looking at the preliminary and later numbers from 2014 - 2018, when overshoots averaged the same 0.9 percent annually registered over the entire period, Robson notes that spending on hospitals came in below projections, but spending on public health and “other health” came in above projections. So did spending on drugs – a worrying sign of what might happen under national pharmacare. The worst area for overshoots was capital spending, with preliminary numbers prefiguring sizable declines, and later ones showing increases.

The 2014 and 2018 period also features significant variations across the provinces. The Atlantic region demonstrated relative frugality in budgeting, with projected numbers for Newfoundland and Labrador, Prince Edward Island, Nova Scotia and New Brunswick predicting healthcare spending increases of about 2 percent, with later numbers largely bearing the projections out.

At the other end of the scale were Nunavut, Yukon, and the Northwest Territories, with sizeable overshoots. Saskatchewan, Ontario, Quebec, Alberta and British Columbia also overshot. Only in Manitoba and New Brunswick did the later numbers come in below the preliminary ones.

“This variation across the country suggests that provinces and territories can learn from others’ experience when it comes to holding the line on spending and shifting care to more cost-effective channels,” said Robson. “We need that learning: fiscally sustainable healthcare is not just about budgeting affordable amounts; it is about hitting those targets.”

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For more information: Contact William B.P. Robson, President and CEO; or David Blackwood, Communications Officer, the C.D. Howe Institute, on 416-865-1904 Ext. 9997 or dblackwood@cdhowe.org

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. Widely considered to be Canada's most influential think tank, the Institute is a trusted source of essential policy intelligence, distinguished by research that is nonpartisan, evidence-based and subject to definitive expert review.