“Don’t Panic: The Fiscal Sustainability of Medicare, Past and Future

Robert G. Evans

Centre for Health Services and Policy Research, UBC

June 17, 2010

First Law of Health Economics

• Every dollar of health spending is a dollar of someone’s income.

• Therefore: total health spending is necessarily identically equal to total health incomes.

Adam Wildavsky’s Law of Medical Money

“… costs will increase to the level of available funds . . . that level must be limited to keep costs down.”

“Doing Better and Feeling Worse: The Political Pathology of Health Policy”

Daedalus Vol. 106, no.1, 1977, pp. 105–124.

Shoppers’ Drug Mart shares (SC-TSX)

• April 7, 2010 $43.50-$44.00• April 8, 2010 $38.00

…• June 15, 2010 $34.53

• Reduction in Shoppers’ market capitalization: Roughly $2 billion

CANADA Provincial Government Expenditure over GDP 1980/81 to 2008/09

0%

2%

4%

6%

8%

10%

12%

14%

80/81 81/82 82/83 83/84 84/85 85/86 86/87 87/88 88/89 89/90 90/91 91/92 92/93 93/94 94/95 95/96 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/090%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Total Health Medicare Other Programs Non-Program -RH scale Health/All Programs

Canada, Provincial Government Expenditure on Medicare and on All Health Programs, as a Share ot Total Revenue, with and without Tax Cuts, 1980/81 to 2008/09

10%

15%

20%

25%

30%

35%

40%

45%

All Health Exp. over All Rev. M'care Exp. Over All Rev. All Health Exp. Over Aug. All Rev. M'care Exp. Over Aug. All Rev.

Canada, Provincial Government Revenue, Total and Components, as percent of GDP, 1980/81 to 2008/09

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

80/81

81/82

82/83

83/84

84/85

85/86

86/87

87/88

88/89

89/90

90/91

91/92

92/93

93/94

94/95

95/96

96/97

97/98

98/99

99/00

00/01

01/02

02/03

03/04

04/05

05/06

06/07

07/08

08/09

All Revenues Federal Transfers Own Source Revenues Own Source Revenues plus tax cuts All Revenues plus tax cuts

Canada, Provincial Governments, Total Revenues over Total Expenditures, 1980/81 to 2008/09

0.40

0.60

0.80

1.00

1.20

1.40

80/81

81/82

82/83

83/84

84/85

85/86

86/87

87/88

88/89

89/90

90/91

91/92

92/93

93/94

94/95

95/96

96/97

97/98

98/99

99/00

00/01

01/02

02/03

03/04

04/05

05/06

06/07

07/08

08/09

All Rev. /All Exp. Program Exp./All Exp. Tax Aug. Rev./All Exp.

Canada, Health Expenditures per capita, constant $1997, 1975-2009, Selected Components

$0

$200

$400

$600

$800

$1,000

$1,200

Hospitals Oth. Inst. MDs Rx drugs

Canada, Health Expenditures as Percent of GDP, 1975-2009, Selected Components

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

Hospitals Oth. Inst. MDs Rx drugs

Canada, Health Expenditures per capita, constant $1997, 1975-2009

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500

Total NHE H & MC All Prov. Gov. Total ex Rx

Canada, Health Expenditures as Percent of GDP,1975-2009

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

Total NHE H & MD" All Prov. Gov. Total ex Rx