A paramedic loads a stretcher into an ambulance at a hospital in Montreal in 2022. Spending on health care in Canada has grown by more than four per cent from 2024, according to the Canadian Institute for Health Information.Ryan Remiorz/The Canadian Press
What both grows and shrinks at the same time?
The answer to that riddle is: Spending on Canadian health care.
Newly published data from the Canadian Institute for Health Information show annual health expenditures are now just a titch under $400-billion. A projected $398.8-billion in 2025, to be more exact.
That’s $15.8-billion more than a year ago – 4.2 per cent more than was spent in 2024.
But per the CIHI analysis, most of that increase will be gobbled up by the effects of inflation, population growth and the aging of patients.
In other words, even as health spending rises at a rate faster than inflation, we are essentially treading water.
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There is no new money to do new things or to make crucial investments in infrastructure. There is barely enough to do what we did last year – however inadequate that was.
To illustrate the problem, CIHI examined what happened in 2024. Health spending jumped a whopping 6.5 per cent from the previous year, but inflation was 4.9 per cent. The population grew by 3 per cent, and aging accounted for a 0.6-per-cent increase in costs.
When you crunch the numbers, the real dollars available actually shrunk by about 2 per cent. That’s an untenable situation in the long term – and even the short term.
The good news is that inflation rates – which haven’t been this high since the 1980s – have slowed a bit, projected at 2.9 per cent in 2025.
And the federal government’s crackdown on immigration, and its new restrictions on foreign students and foreign workers, mean population growth will be stagnant at 0.3-per-cent growth. (The restrictions on newcomers will also hit health care particularly hard, at a time when there are dire shortages of workers.)
There are three major categories of spending in Canadian health care: Hospitals, physician services and drugs.
Hospitals account for 26 per cent of spending or $103.7-billion in 2025. Almost half of that total goes to paying workers – $50.7-billion.
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No category of spending is growing faster than hospitals and that’s because, as labour shortages worsen, compensation is soaring – by 13 per cent last year.
Physician services account for 13.8 per cent of health spending, a projected $55-billion this year to compensate 99,555 registered physicians.
Yet, as we know all too well, 6.5 million Canadians don’t have a primary-care provider, and wait times for surgeries and other types of medical care keep growing.
Drug expenditures account for 13.3 per cent of the total health spend at $53-billion. Increases are being driven by high-cost biologics and specialty drugs targeting genetic disorders.
Other spending categories include “other institutions” like long-term care homes at $53.4-billion; “other professionals” like dentists and physiotherapists at $43.5-billion; public health, $23.5-billion; and, home and community care at $17.5-billion.
Only 4.5 per cent of health spending, or $17.9-billion, goes to capital projects like building new hospitals. Administration costs are just 3.1 per cent of the total spend at $12.3-billion, but many admin costs are hidden in other categories like hospital spending.
Not all this spending comes from the public purse but 71 per cent does. That means 29 per cent of Canadian health spending is paid privately, most of it on drugs, dental care and vision care.
Our private spend is the highest percentage of any Western country other than the U.S. So much for the belief Canada has a “one-tier” health system.
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The other myth that the CIHI data addresses, at least indirectly, is that aging boomers are the source of soaring health costs. Less than one percentage point (0.6) of the increases in health spending is attributed to the aging of the population, a number that has held steady for years.
What’s driving costs is greater utilization of health services (in large part due to new technologies) and wage increases.
There are two important messages in the data. First, health spending is outpacing economic growth, and having health care eat everyone else’s lunch is economically and politically unsustainable.
And second, as Anderson Chuck, the new president of CIHI, says: “The solution is not more spending, it’s innovating how we resource and deliver health care.”
This requires some tough conversations, like: What are the limits of medicare? Are we getting value for money for the services we provide? Do we have the right health work force?
In other words, doing things differently. We cannot spend forevermore, doing more of the same, and then bemoan the predictable results.