How Sustainable is Medicare?

CCPA
September 2007

A Closer Look at Aging, Technology and Other Cost Drivers in Canada’s Health Care System
By Marc Lee

There is little to suggest that health care costs will spiral out of control as Canada’s population ages, says a new study released today by the Canadian Centre for Policy Alternatives.

The study, by CCPA-BC Senior Economist Marc Lee, finds that population aging is only a small contributor to rising health care costs, and that the system can be maintained and even enhanced without breaking the bank.

“There is no demographic time bomb waiting to go off in our health care system,” says Lee.

The study finds that:

• Over the past decade, the impact of population aging on health care spending was only 0.8% per year.
• To keep current service levels and accommodate for future population growth, aging, and inflation, health care expenditures must rise by 4.4% per year. This is very affordable in the context of reasonable economic growth.
• If economic growth rates in the future are consistent with those over the past decade, health care spending as a share of the economy (GDP) will actually fall over the next 50 years.
• By dedicating the same proportion of new economic output to health care, not only will there be enough money to pay for existing services (even after population growth, aging and inflation), there will still be enough for modest expansion of services.

“The real challenge for future health care expenditures comes not from an aging population but the costs associated with new health technologies, such as new surgical techniques, diagnostics, prescription drugs, and end-of-life interventions” Lee says. “We’ll have to decide how to weigh the benefits of new innovations against their costs. And those decisions are best made in the context of a public system.”

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