In 2004 institutional care accounted for the largest proportion of Canadian health care spending at $38.9 billion, with hospitals accounting for nearly 30% of total health expenditures in Canada and other institutions (primarily nursing homes) accounting for another 10% of total health spending. Hospital spending has consistently been the primary driver of health care spending growth.

During the past three decades hospital utilization in developed countries has dropped dramatically. In the United States the rate of hospitalization has dropped 40 percent since 1980, and in Canada during the 1990’s, hospitalization rates dropped nearly 30 percent. Better knowledge and public education about illness and disease, innovative procedures, new diagnostics and effective new medicines all contribute to the shift from inpatient to outpatient or community-based care. If hospitalization rates and lengths of stay had remained the same in 2001 as in 1996, an additional 1.45 million bed days would have been utilized in 2001.

The recent initiative by Ontario’s Ministry of Health to cut $200 million in provincial drug benefit spending ignores the reality that the reduction in Ontario’s rate of hospitalization over the past 2 decades has saved Ontario taxpayers billions of health care dollars in prevented or avoided hospitalizations. Much of this reduction has been made possible by effective new treatments including new medicines. Improving the quality of health care not only saves dollars, it also improves the quality of life for elderly and other vulnerable patients who count on publicly-funded drug benefit programs to get access to effective new medicines.

As the population ages, the number of Canadians living with chronic conditions is growing at a rate far greater than the rate of overall population growth. This growth has a serious impact on the financial sustainability of health care in Canada. Restricting access to new medicines covered by provincial drug plans in order to contain the growth in drug plan costs may actually contribute to greater increases in overall health care costs.

The Ministers’ and the Prime Minister brokered a deal behind closed doors on September 16, 2004. Emerging as the main priority for the Ministers was the reduction of wait times and the need to make timely access to care a reality for Canadians. (It should be noted that the federal transfers to Quebec will be used by that government to pursue its’ own strategies.)