May 1, 2023

Weekly EconMinute—Health spending

In this week’s EconMinute, we’re talking about health spending.

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In 2019, the Government of Alberta created the Blue Ribbon Panel on Alberta’s Finances. This panel was tasked with evaluating the province’s fiscal outlook and creating a plan to balance Alberta’s budget without raising taxes.

The panel’s final report, called the Mackinnon Report, found that the provincial government had a long-standing overspending problem.

“Alberta’s annual expenditures would be $10.4 billion less if its per capita spending simply matched the average of spending in Canada’s three largest provinces: British Columbia, Ontario and Quebec—and we would not have a deficit.” (pg. 4).

The MacKinnon Report found that the government was spending too much across a range of services, but overspending on health care was at the top of the list.

Indeed, for 15 years (2005-2019), Alberta’s government real per capita spending on health care was significantly higher than British Columbia, Ontario, and Quebec—averaging $750 per person more each year than the average of the three major provinces’ annual per capita spend.

Since then, on recommendation from the Mackinnon Report, Alberta’s gap with comparator provinces has closed. In 2020, Alberta’s gap with the national average narrowed to less than $250 per person, and in 2022, Alberta was one of the lowest-spending provinces for health care on a per capita basis.

Here’s what we find when we dig into the data:

  • In 2020, Alberta spent an average of $6,180 per person on health care, about 4.1% above the national average ($5,940). By 2022, Alberta brought spending down to $5,960 per person—3.1% below the national average ($6,150).
  • While these figures suggest that Alberta now underspends relative to most other provinces, the truth is somewhat more complicated. Data on health care spending by age range suggest a much wider gap. Data are only available for 2020, but apart from young children, Alberta spends between 10% and 20% more than the national average in every age category.
  • How is it that Alberta’s health care spending was just 4.1% higher than the national average in 2020 but so much higher in each age category? It’s because of our relatively young population. Health care costs rise dramatically as the population ages, and Alberta has proportionately fewer older residents than other provinces.
    • After adjusting for differences in age, Alberta’s spending per person was well above the Canadian average in 2020 (+15.7%), with the second-highest per capita spending levels after Newfoundland and Labrador.
    • This suggests that Alberta might still be overspending on health care. However, the impact of this is masked due to the province’s comparatively young population. 

Alberta’s younger population gives the province a significant advantage in terms of public health care costs compared to other provinces, but we are not immune to the effects of population aging. Health care spending pressures in the province will continue to rise in the years ahead.

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