Current Trends in Canadian Health Care: Myths and Misconceptions in Health Economics

Abstract

This paper is concerned with the economic aspects of the trends in Canadian health care. Various myths and misconceptions abound regarding the applicability of economics to behaviour in the health care industry as well as to the interpretation of recent trends. Both issues are examined in this paper.

While most discussions regarding health care trends begin with the share of health expenditures in Gross National Product, I propose an alternative share that adjusts for cyclical variations in both unemployment and labour force participation. Using this measure, I show that the “real” growth of resources devoted to the health care industry is much larger than that obtained with conventional measures, and that the difference in growth rates between Canada and the U.S. is narrowed considerably.

The paper outlines and disputes the validity of three public health policy propositions. First, it is not empirically valid to say that the introduction of universal medical insurance in Canada successfully contained the growth in the share of society's resources devoted to the health care industry. Second, it is not correct to argue that the change in the federal funding for hospital and medical care in 1977 was a “fiscal non-event”. And finally, the proposed “equity” funding formula for Ontario hospitals is unlikely to contain costs and will potentially skew hospitals towards the provision of complex forms of care instead of cost-effective community-based alternatives.