Will an aging population bring BC’s health care system to its artificial knees?

November 7, 2006

One argument you are likely to hear in BC’s new “conversation on health” is that public health care is unsustainable because our population is aging and seniors use a disproportionate amount of health care services.

But before we hit the collective panic button, let’s take a look at the facts.

While population aging has put upward pressure on health care costs, its impact is relatively small. Over the past decade, it has accounted for annual cost increases of just under one percent, and projections indicate that it will be only slightly higher in the future.

If we take other cost pressures, such as inflation and population growth, into account, BC needs to increase health care spending by just under five percent each year to maintain current service levels for an aging population.

The good news is that the economy will also be growing, and what matters is the size of health care expenditures relative to our total income (or GDP) – not the share of the provincial budget, as Finance Minister Taylor has argued. (Her projections of future expenditures and revenues are also extremely misleading.)

As long as the economy grows faster than health care expenditures, our current system is sustainable. Even if BC’s economic growth rate (nominal GDP) averaged four percent per year – well below historical norms – the additional cost of maintaining current services would be small: an extra penny per dollar of income by 2031.

The bulge of seniors is expected peak around 2031, and will be declining thereafter. So we have lots of time to gradually respond to the challenges posed by an aging population. This includes a restructuring of health care services, such as enhancing home care and residential care so as to take the pressure off the more expensive acute care system. We should also emphasize prevention and population health initiatives to reduce the overall incidence of ill health.

A final element related to health care spending is that the suite of services we call health care has expanded over time. A typical British Columbian today receives about one-and-a-half times the amount of health care services as his or her predecessor of thirty years ago.

If future economic growth rates remain consistent with those over the past quarter-century (5.7 percent per year), we actually have scope to expand health care services. On the ground, this could mean more long-term care beds, more comprehensive drug coverage or public dental insurance.

The expansion of health care services is also intertwined with the bigger issue of technology. The real financing challenge comes from advances in technological possibilities, broadly defined to include pharmaceutical drugs, new surgical techniques, new diagnostic and imaging technologies, and end-of-life care.

New technology almost always increases total costs, even when it reduces the cost per procedure.

An example of this is knee and hip replacements, where waiting lists have been a major concern. In response, the BC government has dramatically increased surgeries, at rates well beyond what population growth and aging would require.

Yet, waiting lists are still an issue because the advent of less invasive (and less risky) surgical techniques has increased the number of people who can have such surgeries. Compared to 1990, today’s 80-year-old is twice as likely to have a knee replacement.

Another example is end-of-life treatments. Dying has become very expensive: research has found that one-third to one-half of a typical person’s lifetime health care costs come in the final year of life. This raises ethical dilemmas, particularly when technology can prolong life by days or weeks, but with little or no improvement in health status or quality of life.

These technological challenges can be addressed most efficiently and equitably in the context of a public system. A thorough process of health technology assessment is required to ensure that new technologies provide benefits in accordance with their costs. Public policy initiatives could also be implemented to better control drug costs, through greater generic production, bulk purchasing, and an expansion of BC’s successful reference drug program.

That’s the “conversation” we really need to have.

The good news is that the challenges facing public health care are not demographic time bombs beyond our control, but technological issues that, while profound, are suitable to a public process that is well within our control. It is not the number of seniors that is the problem, but finding a rational framework to ensure we spend our health care dollars as effectively as possible.

Marc Lee is Senior Economist in the BC Office of the Canadian Centre for Policy Alternatives, and the author of “Is BC’s Health Care System Sustainable? A Closer Look at the Costs of Aging and Technology,” available at www.policyalternatives.ca.