The Canadian Institute for Health Information (CIHI) has released the 27th edition of the annual publication on health expenditure trends which provides detailed information on health spending in Canada using the National Health Expenditure Database (NHEX).

Here is a snapshot of the expenditure trends of 2023, according to CIHI:

Total Health Expenditure to Reach $344 Billion in 2023, Representing Modest 2.8% Growth Over Previous Year

• Total health expenditure in Canada is expected to be $344 billion in 2023 — over $9 billion higher than in 2022.
• Total health spending in Canada is expected to increase by 2.8% in 2023, after a mere 1.5% growth in 2022. The modest increase comes after a surge in growth of 13.2% in 2020 and 7.8% in 2021, due to the COVID-19 pandemic. In the 5 years before the pandemic (2015 to 2019), annual growth in health spending averaged 4.3% per year.
• Health spending growth in 2022 and 2023 has not kept pace with inflation and population growth combined. This may be due in part to inflation rates not seen since the 1980s. In 2022, annual growth in the total Consumer Price Index (CPI) rose to a 40-year high of 6.8%. All economic sectors have been impacted by price inflation, including health care. However, health care service prices are negotiated and locked in to multi-year contracts. Therefore, health inflation tends to lag inflation in the general economy. (i) Inflationary impacts on health care providers and medical goods will be key drivers to monitor in the future.

Lingering Effects of the Pandemic Contribute to Growth in Hospitals and Physicians Categories

Historically, Hospitals, Physicians and Drugs have been the largest categories of health expenditures. Combined, they represent over 50% of total health spending in Canada.

• Hospital spending. CIHI's report Taking the pulse: A snapshot of Canadian health care, 2023 shows that during the first 2 and a half years of the pandemic, about 743,000 (13%) fewer surgeries were performed in Canada (not including Quebec) compared with before the pandemic. As a result, hospital spending grew modestly, at 2.1% in 2020. Efforts to reduce backlogs and wait times, along with delayed demand for hospital services, contributed to a rebound in spending growth. Hospital expenditures are projected to increase by 11.1% in 2022 and 4.1% in 2023.
• According to a CIHI data release on hospital spending, compensation of hospital workers accounted for the largest share of hospital spending (63.1%) in 2021–2022. Staffing shortages, growing demand for hospital services and a persistently high inflation environment may increase pressure on the cost of hospital care in the coming years.
• Physician spending. In 2020, physician spending decreased by 3.7%. This was due in large part to the deferral of care (e.g., delaying routine visits for chronic illnesses, laboratory tests and screenings) because of the pandemic. As services gradually resumed, growth in physician spending recovered. Physician spending growth was 6.4% in 2021 and is estimated to be 9.5% in 2022 and 6.9% in 2023. Continued increases in the need for physician services and inflationary pressure during contract renewals will be key drivers of physician expenditures in the future.
• Drug spending. Total drug spending is projected to increase by 7.0% in 2022 and 4.1% in 2023. CIHI's data release Prescribed drug spending in Canada shows that the drugs to treat cystic fibrosis (Trikafta) and diabetes (Ozempic) were the top contributors to the growth in public drug program spending in 2022. Additionally, spending on biologic drugs increased; however, continued uptake of biosimilar drugs has a dampening effect on drug spending growth.

Health Spending into the Economic Downturn

Historically, Canada has seen health spending grow similar to, and at times faster than, economic growth. With slower economic growth projected for 2023, health expenditures are expected to rise modestly. This trend is much like the experience of the first half of the 2010s as the economy recovered from the financial crisis of 2009.

• It is estimated that total health spending will represent 12.1% of Canada's gross domestic product (GDP) in 2023. This is down from the peak of 13.8% in 2020, when additional surge funding was used to respond to the pandemic while measures to contain the spread of the virus resulted in a drop in economic growth.
• Looking ahead, health systems will face the convergence of economic forces and increasing health care needs due to population aging and growth.
• In February 2023, the federal and provincial/territorial governments agreed to a new arrangement that will provide the provinces and territories with $196.1 billion in additional health funding over a 10-year period. The last time a 10-year health agreement was reached, in the 2000s, health spending growth exceeded 6% per year.