Health-care costs double; swelling ranks of doctors drive rise

TORONTO — Health-care costs in Canada doubled over the past decade and will cross the $200 billion mark this year, a report released Thursday reveals.

TORONTO — Health-care costs in Canada doubled over the past decade and will cross the $200 billion mark this year, a report released Thursday reveals.

The report shows, though, that the growth in health-care spending has actually started to slow, after rising at an average rate of seven per cent a year during the period from 1998 to 2008.

Health-care spending will increase by four per cent this year, the lowest percentage increase in the past 15 years, said the report, from the Canadian Institute for Health Information.

A key driver of the rising costs is what the system spends on doctors, which rose by an average of 6.8 per cent a year from 1998 to 2008. Of that, 3.6 per cent was attributable to increases in the fees paid to physicians. The rest related to increased usage of health care, in part due to population growth and aging.

With medical schools geared up to churn out substantially more physicians in coming years, the system could be heading for a perfect storm, a health consultant who studied the report predicted.

“The pig is moving through the python,” said Steven Lewis, a consultant based in Saskatoon. “We’re starting to see the first effects of greatly increasing enrolment in medical school, the pouring out of new graduates.”

The report, called National Health Expenditure Trends, 1975 to 2011 was released with a companion document, Health Care Cost Drivers: The Facts.

Canadian medical schools graduated close to 6,500 new physicians between 2005 and 2009, Chris Kuchciak, CIHI’s manager of health expenditures, said during a briefing on the report.

As these new doctors graduate, Canada is moving from a state of under-supply to one of over-supply — at least in the cities, Lewis said. Small towns and rural settings are still plagued by a shortage of physicians and the influx of new doctors is unlikely to mitigate that problem.

Currently most doctors in Canada are paid on what’s called a fee-for-service model. They can charge the province and territory in which they practise a set amount for doing an annual checkup, or administering a flu shot or ordering diagnostic tests. That means the more services a doctor delivers, the more he or she gets paid.

If there is an over-supply of doctors, the system will effectively encourage doctors to increase the amount of care they give to each patient as a way to guarantee their incomes. “In a fee-for-service system of course, they need to provide services in order to make a living. So that’s going to create even more pressure in the future for additional costs,” Lewis predicts.

Some provinces are moving to team practices, where doctors are paid an amount for each patient on their rosters. Proponents say this type of model encourages the system to be more efficient. If doctors aren’t paid per service, they can delegate tasks that don’t require a physician’s skills to nurses, nurse practitioners or a physician assistant working within the practice.

Will Falk, a health policy analyst at the University of Toronto’s Mowat Centre, says the single biggest problem for sustainable health care is physician fee schedules and their fast rate of growth.

“We need to either hard cap growth in total expenditures and have the physicians manage the trade-offs among the specialties or we need to agree with the medical associations on a different way of paying doctors,” Falk said.

“There are some specialties that are simply paid too much.”

Falk said some of the costs in the system have been coming down, but the prices attached to delivering care have not.

“Pricing mechanisms are broken,” Falk said. “There are a lot of costs that are coming down. But prices aren’t coming down, because of failures in the funding system.”

Lewis suggested Canada missed a major opportunity in the last decade or so to effect real change in the system, as governments started to invest again in health care after a period of spending contraction in the mid-1990s.

“Ever since then, governments have been pouring enormous increases into the system, well beyond the rate of inflation. And instead of buying change, we essentially entrenched the status quo, only more of it,” he said.

“What we’ve mainly done is made the existing system bigger and more expensive. But we haven’t necessarily bought quality or even in some cases better access. Because again, if you have no control over where physicians set up practice, you can double the number of physicians in the system, but they’re still going to avoid rural areas.”

The report noted the volume of MRI tests has doubled in the past six years — an example of increased health-care usage. But Lewis said no one has done the analysis yet to determine whether Canadians are healthier as a result of undergoing more MRIs.

The report dispelled the notion that the greying of the Canadian population is behind the substantial rise in health-care costs, saying population aging was responsible for under one per cent — 0.8 per cent — of the cost increases.