WHAT DRIVES HEALTH CARE EXPENDITURES?What drives health care expenditures? Is the level of provincial health care spending across the country related to the health needs of Canadians? How does Manitoba's spending compare to other provinces?
These questions are examined by the Manitoba Centre for Health Policy (MCHP) in a recent study. Specifically, MCHP was asked by Manitoba Health to compare health expenditures from province to province, and investigate if provinces with sicker residents, lower socioeconomic status or a higher proportion of elderly people spent more per capita on health care.
Within Manitoba, more is spent per person on health care in areas of the province where residents are generally in poor health. This study looked to see if the same was true when Manitoba was compared to other provinces. For instance, Manitoba has a higher proportion than most provinces of elderly residents and aboriginal people--two population groups who have been shown elsewhere to be in poor health. Does that demographic trait relate to increased health care spending by Manitoba compared to other provinces?
These questions may sound like they were easy to answer. They were not. In fact, it was remarkably difficult to compare provincial government spending on health care. Health care spending and use are not reported consistently across provinces.
Despite the difficulty in comparing data, particularly on physician payments and hospitals, it was possible to draw some general conclusions from this study that are relevant to the ongoing public debate on Canada's publicly-funded health care system. We found that:
the amount a province spends on health care does not seem to have much to do with the relative needs of the population; wealthier provinces tend to have healthier populations; wealthier provinces tend to spend more money per capita providing health care than poorer provinces; Manitoba's mid-ranking among the provinces on health care spending matches its mid-ranking on a key measure of health status (age-standardized mortality rates), but that correlation is an exception to the general rule.
MethodsIt is widely recognized that many factors contribute to the health of a population and to differences in the need for health care services. Many of these differences are linked to socioeconomic factors such as income and employment, demographic factors such as age or gender, and environmental factors such as housing and workplace conditions.
The study looked at three sets of characteristics which have been found to influence the need for health care:
health status (whether residents of a province were in poor health); socioeconomic status (populations with high unemployment, low educational levels, many single parent families and poor housing have been found to be at high risk for poor health); population demographics (such as the proportion of elderly people--who generally need more health care--in a province).
First, the study compared provinces according to the three sets of characteristics. Next, differences in per capita provincial expenditures on health care were reviewed. Finally, the relationship between factors affecting the need for health care and expenditures on health care was examined. Inter-provincial expenditure comparisons used Health Canada data for 1994. The data include spending on all health programs, whether or not all provinces offer the program.
Age standardized mortality--death rates adjusted for the age of the population--were used as the key indicator of health status (figure 1). Saskatchewan has the lowest and the Atlantic provinces have the highest mortality rates. Manitoba showed up most often in the middle ranks on all three groups of indicators of health, socioeconomic status and demographics. Of note though, Manitoba had high poverty rates among children. Ontario, Alberta and British Columbia generally ranked highest overall on both health status and socioeconomic characteristics, except Alberta had one of the worst infant mortality rates. Nova Scotia and Newfoundland most often ranked lowest, indicating their residents are generally in poorer health and are at higher risk from socioeconomic factors. High unemployment, child poverty rates and low average incomes all likely have a negative impact on the health of the population. Saskatchewan stood out among the provinces because its results did not fit the general pattern. It scored well on many indicators of health status of its population. Yet it has a high proportion of elderly people and aboriginal residents, and ranked only medium to low on socioeconomic factors.
Health care spending
Manitoba was again in the middle ranks in terms of health care spending. British Columbia, Ontario and Quebec spent the most per capita on health care, while New Brunswick, Saskatchewan and Nova Scotia spent the least. From the highest to the lowest, the variation was $360 (figure 2).
Relationship between spending and healthThe data were examined for a relationship between the factors indicating need for health care services and per capita provincial spending.
No evidence was found that demographic differences among provinces, such as the proportion of elderly residents, explain differences in health care spending. Provincial per capita spending was not significantly correlated with many factors that have been linked to increased need for health services, such as unemployment, low income and child poverty. Manitoba's mid-ranking on health care spending matched its mid-ranking on age-standardized mortality rates, a key measure of health status, but it was an exception. For most other provinces, total expenditures appear to have no relationship to overall health of the population. Saskatchewan presented an interesting anomaly. It ranked among the lowest in per capital health care spending yet had the best health status, based on age-standardized mortality rates, of all the provinces. There did appear to be an association between the wealth of a province--if housing prices can be used as proxy for wealth--and its spending on health care. Provincial GDP per capita was also higher among provinces with higher health care spending, although the association was not statistically significant.
Could higher spending be caused by higher wages in the wealthier provinces? A cursory review of average nursing department wages across the country did not suggest that higher spending was related to wages in the health care system. However, further study is needed to fully explore this question.
Sources of health care spendingTo complete the picture, the study examined all health care expenditures. Provinces provide the lion's share of health care in Canada, but their relative contribution to health care is declining, and other expenditures are rising. Provincial health expenditures accounted for 66% of total health care spending in Canada in 1994 (figure 3), compared to 70% in 1985.
The share of public spending from other sources, including workers' compensation payments, municipal expenditures and federal direct health spending for certain groups such as First Nations, the Armed Forces and Veterans, has stayed around 6% since 1985. The percentage of privately-funded expenditures on health care rose from 24% in 1985 to 28% in 1994.
In Manitoba, private sources provided a share similar to the Canadian average although other public sources (workers' compensation, municipal and federal direct spending) contributed more than the Canadian average. Therefore, the share of health care funding shouldered by Manitoba was somewhat lower than the Canadian average (62 % vs. 66%). When all public expenditures were counted, Manitoba's per capita spending moved from a medium to a high ranking.
ConclusionsInter-provincial comparisons provide an opportunity for provinces to learn from each other's experience. However, the difficulties in making inter-provincial comparisons suggest the need to deal with gaps and inconsistencies in data as soon as possible.
For example, MCHP was asked to look at whether Manitoba spent more or less on physicians relative to other provinces and the needs of their populations. We were unable to make such comparisons because physicians are paid in two different ways: fee-for-service and salary. Some provinces report salaries with physician remuneration, and others include salaries in the hospital sector. The study suggests further investigation on a number of important issues, among them:
How much spending in the health care sector is necessary to achieve good health, and how much spending is driven by other factors unrelated to health? On the other hand, how much is health influenced by health care spending, and how much is it influenced by other factors? Saskatchewan's results stand out from the rest of the country. What is Saskatchewan doing differently that allows the province to spend less on health care and have a healthier population overall? And last, but perhaps most important, do differences in expenditures on health care across Canada affect the accessibility of health services to all Canadians, as defined in the Canada Health Act?
We began by trying to find out how Manitoba's spending on health care compared to other provinces, particularly since this province has a relatively high proportion of elderly and aboriginal people, two groups who are known to be in poorer health. We were not able to answer definitively, and we will not be able to provide definitive answers in the future until all the provincial, territorial and federal departments of health provide consistent data.
Summary written by Cheryl Hamilton and Marian Shanahan, based on the report: Inter-provincial Comparison of Health Care Expenditures: by Marian Shanahan, and Cecile Gousseau.
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