Research synthesis on cost drivers in the health sectors and proposed policy options

Alexandra Constant, Stephen Petersen, Charles D. Mallory (consultant) and Jennifer Major
Canadian Health Service Research Foundation

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This synthesis and the concluding policy options represent a starting place for more in-depth exploration by CHSRF, and will inform policy dialogues on how best to ensure accessible, high-quality and sustainable healthcare for Canadians.

This report synthesizes the current body of knowledge on cost drivers in Canadian healthcare. Cost drivers are factors that bring about increased spending on healthcare. Thus, a comprehensive understanding of cost drivers is essential to a productive debate on the sustainability of Canada’s publicly funded healthcare systems.

In Canada, health spending is rising faster than the economy is growing (Section 2). Over the 1999–2009 period, expenditure growth within the health sector was fastest for capital (e.g. construction of hospitals, medical equipment or software for healthcare facilities), drugs and public health (e.g. food and drug safety, health promotion, community mental health programs, and prevention of communicable diseases). While reimbursements for hospital and physician services comprise the bulk of public sector healthcare spending, growth in these areas was comparatively small.

In the context of rising government healthcare spending, a key question for policy-makers should be whether increased expenditures generated by technological innovation are associated with positive net benefits. However, measuring the value of innovation in the health sector is challenging, and precise estimates of its contribution to improvements in longevity and health status are currently not available.

Key Messages

  • Potential emerging cost pressures include a trend toward personalized medicine and the presence of direct-to-consumer advertising for diagnostic and genetic testing. 
    Policies can be implemented to manage rising healthcare expenditures and to improve value for money (efficiency) within systems.
  • Instituting a wider use of health technology assessment at all levels in health systems to inform clinical decision-making, reimbursement decisions, setting priorities and negotiating prices of new technologies, and provider fees
  • Shifting priorities for the allocation of funds within systems to support services, which reduce spending in higher cost areas, such as accelerating funding increases for community care 
  • Accelerating the implementation of coordinated health information technology systems 
  • Implementing measures to contain prescription drug expenditure growth 
  • Developing alternative provider and hospital payment arrangements.