1

Health Care Cost Drivers: Hospital and Other Health Expenditures—Descriptive Overview

April 28, 2011

2

Overview

• What are the growth trends in health spending categories other than hospitals, physicians and drugs?

• What are some of the key trends in public-sector spending on long-term care?

• How have capital investments in buildings and equipment affected overall spending?

• What are the key issues to watch in the future?

3

Overview of Other Health Expenditures

4

Rising Share of Other Health Expenditures During the 1990s

Hospitals Drugs Physicians Other 0%

10%

20%

30%

40%

50%

39.1

11.415.2

34.4

29.6

15.4 13.4

41.6

28.9

16.313.7

41.1

Share of Total Health Expenditure by Use of Funds, Selected Categories

1990 2000 2010f

5

Long-Term Care, Public Health and Capital Are Significant Categories of Other Health Spending

6%

Other$3.7; 8%

Capital $6.9; 15%

Administration $2.7; 6%

Other Institutions $13.3; 29%

Other Professionals $1.5; 3%

Public Health $12.2; 26%

Home Care $3.9; 8%

Dental Care: 44%Vision Care: 20%

Distribution of Other Health Expenditures by Category, 2010f

Public Sector: $46.5 Billion

Health Research $2.3; 5%

6

Public Health, Capital and Long-Term Care Are Mainly Financed by the Public Sector

Other

Inst

itutio

ns

Home

Care

Public

Hea

lth

Admin

istra

tion

Capita

l

Health

Res

earc

h

Other

Pro

fess

iona

ls0%

20%

40%

60%

80%

100%

76

63

100

55

81

62

10

7167

100

44

83

61

7

1998 2008

Public-Sector Share of Categories

7

Capital, Health Research and Public Health: The Fastest-Growing Categories

Capita

l

Health

Res

earc

h

Public

Hea

lth

Home

Care

Admin

istra

tion

Other

Inst

itutio

ns0%

4%

8%

12%

16%

13.7

11.3

9.6

7.76.6

5.4

Public-Sector Average Annual Growth, 1998 to 2008

Ave

rag

e A

nn

ua

l Gro

wth

8

Increased Spending on Public Health

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

f0%

2%

4%

6%

8%

10%

Public Health Expenditure as a Percentage of Total Public-Sector Spending

9

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

f

2010

f0%

1%

2%

3%

4%

3.23.5

3.73.8 3.8 3.7

3.5 3.53.4 3.4 3.3

Public-Sector Administration Expenditures as a Percentage of Total

Share of Public-Sector Administration Spending Relatively Unchanged in the Past Five Years

10

Growth in Spending on Other Health Professionals Higher in the Private Sector

Public Private$0

$100

$200

$300

$400

$500

$600

0%

1%

2%

3%

4%

5%

6%

$41

$515

Per Capita (2008) AAG (1998–2008)

Per

Cap

ita S

pend

ing

Ave

rage

Ann

ual G

row

th

1.7%

5.6%

More Health Professionals

11

2004

2004 2008Percentage

Change

Percentage Population

Increase

Number of Physicians

60,612 65,440 8.0%

4.2%

Number of Regulated Nurses

315,135 341,431 8.3%

Number of Dentists and Dental Hygienists

35,866 41,798 16.5%

Number of Optometrists

3,941 4,507 14.4%

12

Public-Sector Spending Trends in Long-Term Care

13

The Structure of the 65+ Population Has Shifted Toward Older Seniors

65–69 70–74 75–79 80–84 85+0%

5%

10%

15%

20%

25%

30%

35%31

26

20

1310

29

23

20

1513

Share of Each Senior Age Group in the 65+ Population

1998 Age Distribution 2008 Age Distribution

14

Public-Sector Expenditures on Long-Term Care as a Percentage of Total

8.0%

11.0%

10.7%

10.7%

10.5%

10.7%

10.3%

10.2%

10.1%

9.9%

9.7%

9.7%

19981999

20002001

20022003

20042005

20062007

20080%

4%

8%

12%

16%

12.1 12.0 11.8 11.7 11.6 11.4 11.4 11.0 10.8 10.3 10.0

2.9 2.9 2.9 2.8 2.8 2.7 2.7 2.7 2.7 2.8 2.8

Institutional Care Home Care

Long-Term Care Does Not Account for Increasing Share of Public-Sector Health Expenditure

15

Growth Rates in Long-Term Care Institution Spending per Capita for the Oldest Senior Age Groups Among the Lowest

65–69 70–74 75–79 80–84 85–89 90+0%

1%

2%

3%

4%

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

Growth in Expenditure per Capita Expenditure per Capita (2008)

AA

G:

1998

–200

8

16

Population Aging: Greater Effect in Long-Term Care Institutions

Total

Hospi

tals

Physic

ians

Drugs

LTC In

stitu

tions

0%

1%

2%

3%

0.81.0

0.6

1.0

2.3

Average Annual Growth in Spending Attributable to Population Aging, 1998 to 2008

Ave

rage

Ann

ual G

row

th

17

Beds Staffed and in Operation per 1,000 Seniors Relatively Unchanged

2004 2005 2006 2007 20080

5

10

15

20

25

30

Beds per 1,000 Population (65+)

Public Private

18

Average Annual Growth Rate in Number of Beds in Long-Term Care Institutions per 1,000 Seniors Varied in Selected G7 Countries

United States

United Kingdom

Japan Italy Germany (2003–2007)

Canada-1.0

0.0

1.0

2.0

3.0

-0.5-0.1

0.3

3.0

0.00.2

Ave

rage

Ann

ual G

row

th

2004 to 2008

19

Compensation Unchanged, Number of Full-Time Equivalents Increasing

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008$0.000

$10,000.000

$20,000.000

$30,000.000

$40,000.000

0

200

400

600

800

Inflation-Adjusted Salary and Wage Expenditures per Full-Time Equivalent, and Number of Full-Time

Equivalents per 100,000 Population

Salary and Wage Expenditures per FTEFTE/100,000

20

An Increase of More Than $1 Billion in Home Care Spending

1999–2000 2006–20070.0

1.0

2.0

3.0

4.0

5.0

$2.6

$3.9

Provincial/Territorial Government Spending on Home Care, Current Dollars

$ B

illio

ns

21

Government-Sponsored Home Care Users Rising

1994 20050

5

10

15

20

25

30

23.9

28.1

Government-Sponsored Home Care Users per 1,000 Population

22

Higher Proportion of Residents 85+ in Homes for the Aged

65–69 70–74 75–79 80–84 85+0%

10%

20%

30%

40%

50%

60%

4.18.1

14.8

22.6

50.4

4.16.7

12.7

22.0

54.5

Percentage Distribution of Residents 65+ in Homes for the Aged

1998 2008

23

Rising Proportion of Residents in Homes for the Aged Receiving Type III and Higher Care

1998 20080%

5%

10%

15%

20%

25%

30%

35%

25%

33%

24

Alternate Level of Care Is an Important Issue

• In 2008–2009, there were more than 92,000 hospitalizations and more than 2.4 million hospital days involving alternate level of care stays in Canada. This represented 5% of all hospitalizations and 13% of all hospital days.

• There is a perception that a growing proportion of elderly patients tie up hospital beds while waiting for a place in long-term care.

25

Overview of Capital Expenditures

26

Share of Public-Sector Spending on Capital Trended Upwards in the Last Decade

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

f

-1%

0%

1%

2%

3%

4%

5%

6%

Capital Spending as a Percentage of Total Public-Sector Health Spending

Capital to Total

27

Distribution of Total Capital Expenditures

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 20080%

20%

40%

60%

80%

100%

47 51 53 53 60 60 56 56 62 58 64

53 49 47 47 40 40 44 44 38 42 36

Equipment Construction

28

Capital Expenditure in Health Care

Capital investment by type of asset

1) Construction: facilities and building construction

2) Equipment

Annual Capital Investment by Type of Asset, 1998 to 2008

Type of Asset Value ($ Billions)

AAG 1998–20081998 (% of Total) 2008 (% of Total)

Equipment 1.2 53.5% 3.0 36.3% 9.3%

Construction 1.1 46.5% 5.2 63.7% 17.2%

Total 2.3 100% 8.2 100% 13.6%

29

Increasing Share of Capital Spending for Residential Care Facilities

Nursing and Residential Care Facili-

ties11.4%

 Hospitals75.2%

Ambulatory Health Care

Services10.9%

Social Assis-tance2.5%

1998 Total Capital Spending: $2.3

Billion

Ambulatory Health Care

Services9.5%

Hospitals73.2%

Nursing and Residential Care Facili-

ties16.5%

Social Assis-tance0.8%

2008Total Capital Spending: $8.2

Billion

30

Overall Key Findings

• Long-term care does not account for an increasing share of health spending in the public sector

• The number of full-time equivalent (FTE) personnel (not wages per FTE) is mainly responsible for the increase in institutional care spending

• From 2004 to 2008, trends in beds staffed and in operation kept pace with demographics

• Capital investment in the health care sector significantly increased from 1998 to 2008; the trend was led mostly by long-term care institutions

31

Key Issues to Watch in the Future

• What is the best way to provide care for seniors?

– What will be the balance between hospital care, institutional care and home care during the next decade?

– How will the system optimize the integration of seniors’ care?

• How will provincial deficits and fiscal restraint in future years affect investment in public health and capital?

32

Thank You