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For-profit sectors drive up health care expenditures

Expenditures on hospitals saw some of the smallest increases in public sector health care expenditures over the last decade, according to a 2011 report from the Canadian Health Services Research Foundation (CHSRF).  

In contrast, health services from the sectors dominated by for-profit corporation (drugs and capital expenditures) saw the highest expenditure increases.  In fact the real per capita annual percentage increases for these two sectors were about double the increases for the hospital sector. 

Compound annual growth rates of real per capita public sector health care expenditures, 1999 to 2009, Canada
Use of funds                                                      Compound annual growth rate
Total health                                                                        4.13%
Hospital care                                                                      3.41%
Other institutions                                                                 2.45%
Physician care                                                                     4.30%
Other professionals                                                            -0.82%
Drugs                                                                                  6.32%
Capital                                                                                7.35%
Public health                                                                        5.77%
Administration                                                                     4.05%
Other health spending                                                          4.62%
Source: Research Synthesis on Cost Drivers in Health Sector and Proposed Policy Options, (chart 2.1), February 2011,CHSRF Series on Cost Drivers and Health System Efficiency  (2009 figures forecast)

In Ontario, the annual growth rate for hospitals was smaller still at 2.7% (the second lowest in Canada). 

What remains unclear is the health benefit the rapidly rising expenditures on drugs and capital provide.  Part of the increased costs for drugs and capital is for technological innovation (e.g. new drugs or new capital technologies like MRIs).  Here’s what the CHSRF report says on technological innovation:

In the context of rising public healthcare spending, an important question is whether increased expenditures generated by technological innovation are associated with positive net benefits. Some studies suggest that there are not many opportunities for productivity improvements, such as increased use of ambulatory surgery or reduced length of stays in hospital.  Therefore, measuring the costs and benefits of medical technologies is essential in evaluating technological change and assessing the productivity of medical care.

The report recommends "instituting a wider use of health technology assessment at all levels".
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