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Commentary

Public Health Care on Path to Bankruptcy
Brett J. Skinner, The Fraser Institute, 11-8-05

America’s market-based approach to health care is often criticized as the most expensive in the world - which it is. But the government-financed models touted as the solutions to our woes don’t fare any better in terms of their long-term sustainability. This report, from the Canadian Fraser Institute, shows that the Canada’s tax-funded Medicare program is consuming taxes at an unsustainable pace.

For each of the past five years, public spending on health care in every province has grown faster on average than total revenues from all sources – including federal transfers. Nationally, public health spending grew 8 percent annually, compared to 3.9 percent for provincial revenue, 2.4 percent for inflation and 4.6 percent for economic growth. This has resulted in health care taking up an increasing share of provincial revenue over time. Whether one looks at the most recent 5, 8 or 30 years of data, the trends are all the same. If provincial governments continue to maintain the medicare status quo, public health care expenditures will eventually exceed provincial capacity to pay.

The most recent five-year trends indicate that in 7 out of 10 provinces public health spending is on pace to consume more than half of total revenue from all sources by the year 2022, two-thirds by the year 2032 and all of provincial revenue by 2050. These projections do not even take into account the added pressures from an aging population that will further accelerate the growth of provincial health spending as a percentage of total revenue, and cause these dates to occur much earlier. This should be alarming because even a generous analysis of public health care financing shows the system is unsustainable.

America’s reliance on markets has made our economy the most productive and powerful in the world. Health care should be no exception. Rather than pushing market forces out, policymakers need to find better ways of designing them in, and allowing consumers to better control their own health care spending, while making health care insurance affordable for all.



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