Worthwhile Canadian Initiative

Rising Health Spending Is Not Just About Seniors

The Canadian Institute for Health Information (CIHI) has released its 23^rd annual report on health spending in Canada - National Health Expenditure Trends, 1975 to 2019.  As a member of the CIHI National Health Expenditures advisory panel, it is always great to see the wealth of data on trends in health spending across Canada.   Total health spending in Canada in 2019 is expected to reach $264.4 billion which represents an increase of 3.9 percent over last year and also accounts for 11.6 percent of Canada’s GDP – a figure also up slightly from last year.  After a period of zero average annual growth in real per capita total health spending from 2010 to 2014, the period since 2014 has averaged about 1.4 percent a year.  This, however is lower than the average annual growth rate from 1996 to 2010 at 3.3 percent.  Health spending growth has resumed but on what seems like a more sustainable trajectory given that real per capita GDP growth is closer to 2 percent. 

Much of the concern about rising health spending has focused on the effects of population aging.  Health spending does rise with age as Figure 1 below shows rather dramatically.  Aside from those aged less than 1-year, average per capita provincial/territorial government health spending is well below $5,000 until the 60-64 age group when it starts to rise above that threshold reaching over $30,000 for those aged over 90 years.  Yet, despite this surge after age 60, what is also interesting is that when the drivers to rising health spending are broken down, in 2019, aging per se only contributes 0.8 percentage points out of the 3.8 percent growth in public sector health spending – about 21 percent – with general inflation, population growth and other factors (eg. Technology and utilization) accounting for the rest.  It does lead one to wonder whether this is because today’s seniors are generally quite healthy compared to the past or perhaps there are unmet needs.

What is also interesting and seldom noted is that while provincial/territorial government per capita health spending is highest among seniors, over the last two decades, the rates of growth in per capita spending have not been for seniors.  Indeed, between 2000 and 2017, the highest average annual growth rates have been for children and youth aged 5 to 19, followed by children under age 1-year and adults aged 35-39 as shown in Figure 2. 

Indeed, per capita spending for adults between the ages of 35 and 64 has been growing at a faster rate than those aged 65 to 89.  While it is true that much lower per capita amounts are being spent on those below age 65, this demographic has been seeing faster growth in health spending.  Again, this leads one to wonder given scarce resources, whether there is an implicit transfer of resources underway away from seniors when it comes to new spending growth or whether younger people today have more health problems or utilize health care more than similarly aged groups in the past.  Given the epidemic of obesity and mental health issues among the young, perhaps this is having an impact on health spending needs and expenditures. 

If a significant cohort shift in health care needs and utilization is underway is an interesting question. I suppose fully knowing if this is a recent development or has been underway for the last 50 years requires per capita age spending data going back quite a ways - I am only aware of the CIHI data going back to the mid 1990s or so.  This is an important issue.  While an aging population may only be contributing 21 percent of the increase in health spending now , if younger cohorts at present have deteriorating health status or more health issues than in the past, they may be poised to be a more important driver of health spending both now and in the future.

Historical Canadian Government Data Sources

I recently received the following message from Ryan MacDonald at Statistics Canada:

“I recently came upon a number [of] scans done by our library to place the historical publications into pdfs.  They can sometimes be a little difficult to search for, so I thought I would pass along a few links that may be of use to you or your colleagues in your research.”

So, I think a good way to further disseminate these historical economic data sources more broadly is to post the links here on WCI. Feel free to share.

Canada Year Book

http://publications.gc.ca/site/eng/9.838186/publication.html

Tables of the trade and navigation of the Province of Canada for the year ... (1850-1908)

http://www.publications.gc.ca/site/eng/9.843286/publication.html

Report of the Department of Customs containing the tables of imports, exports and navigation of the Dominion of Canada for the fiscal year ended Mar. 31 ... (1909-1916, 1918)

http://www.publications.gc.ca/site/eng/9.843294/publication.html

Annual report of the trade of Canada (imports for consumption and exports) (1917, 1919)

http://publications.gc.ca/site/eng/9.852124/publication.html

Trade of Canada = Commerce du Canada (1920-1939)

http://publications.gc.ca/site/eng/9.851960/publication.html

Trade of Canada = Commerce du Canada (1939-1970)

http://publications.gc.ca/site/eng/9.809303/publication.html

Imports, merchandise trade / Statistics Canada, External Trade Division = Importations, commerce de marchandises / Statistique Canada, Division du commerce extérieur (1970-2002)

http://publications.gc.ca/site/eng/9.809322/publication.html

Reflections on Westeros

Well, it is the May long weekend and a celebration of Queen Victoria but this year it has also coincided with the end of Game of Thrones and its own set of Kings, Queens and associated dysfunctional noble figures.  There has been a lot of angst expressed about how inadequate the final season has been in terms of plot and character development and the reviews are mixed, but I will leave such matters to others. I want to focus on some other things of a more economic and political nature.

Aside from the visuals of what appears to be a Rostowian pre-takeoff economy marked by low levels of productivity, low technology and a land centered economy with a feudal type of organization, remarkably little insight was offered over the eight seasons as to what the mechanics of the economy were that marked the Seven Kingdoms of Westeros.  Indeed, given the amount of war and pillaging that inevitably must have disrupted trade routes and commerce, it is a surprise that anything was produced at all aside from a thriving weapons and armour industry.  Even the effects of climate change as the endless winter approached did not appear to spark much in the way of policy debate.  And there does appear to have been an abundance of government deficit financing with a monetary institution known as the Iron Bank holding many of the loans.  In the end, the Seven Kingdoms appear locked into a pre-industrial stasis and need some type of political and economic reforms as well as an enclosure movement and a learning focused Renaissance to boost agricultural productivity and ignite an industrial revolution.  However, the last episode suggests that the governing elites are not about to set out on the path of any social, economic or institutional innovations given the shocks of external invasion by zombie like White Walkers and the ultimate battle for the kingdom.

The Hospitalization Life Cycle

The Canadian Institute for Health Information has just released a report on Hospital Stays in Canada which provides a plethora of interesting tables on hospital stays in Canada at a national and provincial level.  Both the age-standardized hospitalization rate (per 100,000 population) and the age standardized average length of stay (in days) in Canada have fallen since 2013-14 going from 8,205 to 7,944 and 7.0 to 6.8 respectively.  The summary graphic for their report lists the top 5 reasons for inpatient hospitalizations as:1) Giving birth (362,700), 2) COPD and bronchitis (93,353), 2) Acute myocardial infarction (71,192), 4) Pneumonia (70,149) and 5) Heart failure (68,972) with the total number of inpatient hospitalizations in brackets beside each reason.  These five causes make up 21.6 percent of total hospitalizations in 2017-18.

Hopefully, Tomorrow Won't Be Yesterday

A short quick post.  Yesterday’s job numbers for Canada were greeted with surprise.  With 55,900 jobs added in February, the sentiment as best summarized by Doug Porter, Chief Economist with BMO Capital Markets is that: “The economy clearly is not falling off a cliff by any means, arguably quite the opposite”.  This is despite what seems to be a slowdown in the Canadian economy as indicated by consumer spending, exports and capital investment by business in 2018.  The more entertaining headline was by BNN Bloomberg which led with the Canadian labour market is off to its best start since 1981 as “The two-month gain is the best start to a year since 1981.” Of course, if the economy is doing so well one wonders why we are holding off on interest rate increases but I digress.

More to the point is what those of us with more historical memory remember about 1981.  Take a look at Figure 1 which plots seasonally adjusted monthly employment gains from January 1980 to December 1982.  January and February 1981 were certainly the two biggest consecutive gains in that period and quite impressive at 66,500 and 76,800 jobs respectively.  But look at what happened next – employment shrank in March of 1981, growth resumed for a few months afterwards and then – well, the economy fell off a cliff into the 1981-82 recession which saw unemployment rates soar to peak at 13.1 percent in December of 1982.

 

 

If we compare monthly employment in the year leading up to January February 1981 to a similar range for January-February 2019 as in Figure 2 one sees that it is not inconceivable that we are again about to fall off a cliff especially given the accompanying aforementioned economic indicators for 2018.  However, a big difference between now and then is monetary policy and interest rates which peak at their post war high about this period.  We are currently still at pretty historic lows for interest rates.  However, based on what happened to employment in 1981, we should know by the end of summer if we are in store for some employment drops.

The Federal Debt of the United States, 1791 to 2018: A Presidential Ranking

A recent story in the National Post by Tristan Hopper highlighted the “utterly unbelievable scale” of current US federal public debt levels.  As is always the case, it is useful to get some historical perspective on the evolution of the U.S. federal debt over time – which under President Trump has become the biggest U.S. nominal gross federal debt ever at about 22 trillion dollars.  It is also interesting to see how US federal debt levels have varied across assorted administrations over time.

NAFTA - The “Worst” Trade Deal Ever

With time on my hands over the last week of the holiday season, I spent a bit more time than usual surfing news channels and watched a press conference by U.S. President Donald Trump in  which among other things he again reiterated how the United States had been hard done by NAFTA and that it was the worst trade deal ever.   Needless to say, while he has pronounced from the mount on this matter numerous times, for some reason it particularly annoyed me this time, so I decided to see what simple evidence could be mustered to weigh in on this point.

Becoming Sustainable: The Six Stages of Provincial-Territorial Government Health Spending

The Canadian Institute for Health Information (CIHI) has released its 22^nd annual edition of  National Health Expenditure Trends covering the period 1975 to 2018 and the basic highlights are as follows:

• Total health expenditure is expected to reach $253.5 billion or $6,839 per Canadian in 2018.

• In 2018, total health expenditure is expected to rise by 4.2%, a slight increase in the rate of growth compared with earlier in the decade

• Provincial per capita health expenditures vary with total health expenditure per capita expected to range from $7,552 in Alberta and $7,443 in Newfoundland and Labrador to $6,597 in British Columbia and $6,584 in Ontario.

• Drugs expenditure growth is the fastest among 3 largest health spending categories with Hospitals (at 28.3% of spending), Drugs (at 15.7% of spending) and Physicians (a 15.1% of spending) together expected to continue to account for close to 60% of total health spending in 2018.

The bulk of health spending in Canada is done at the provincial-territorial level of government which in 2018 is forecast at $162.7 billion out of $253.5 billion or about 64 percent of total health spending – with remainder being private ($78.7 billion) or remaining public sector spending ($12.1 billion).  While much of the focus by the public on this annual release of health information is the current rate of increase and state of spending, a longer-term perspective is useful given the constant preoccupation with health care system fiscal sustainability. A historical retrospective of the evolution of provincial-territorial government spending since the dawn of Medicare is in order using Statistics Canada data for the 1965 to 1974 period and CIHI data since 1975.

Australian Economic Growth in Longer Term Perspective

A recent issue of The Economist highlighted the stellar economic performance of Australia – or as it was termed, “The Wonder Down Under” – arguing its economy is most arguably the most successful in the rich world.  Australia has apparently not seen a recession for 27 years, seen its median income has grown four times as quickly as the United States and has low public debt.  The Economist attributes some of this to good luck – natural resource endowments – as well as proximity to Asian markets particularly China.  However, policy decisions are also seen as important with key ones being the reform of social spending – health care and pensions – shifting more of the burden of these systems onto users as well as a more enthusiastic immigration policy which has brought in many skilled migrants.

This Australian resurgence is quite interesting given the ebbs and flows of Australian economic performance over the long run.  According to Ian McClean, in the late 19^th century, Australian incomes per capita were on average actually 40 percent higher than those in the United States with this advantage the result of high labour force participation rates, higher labour productivity and of course natural resource endowments.  Yet, by 1914 this lead over the United States had evaporated as a result of the transitory nature of these advantages.  In particular, “periods of weakest Australian growth, relative to benchmark economies, occur when the resource-based sectors of the economy have languished.”

Is the Russia-America Global CoDominium About to Begin?

In the wake of the Putin-Trump Helsinki summit, there is much speculation about what was actually said between Putin and Trump behind closed doors and the uncertainty spread throughout the American government about whether agreements had been reached on issues such as Syria and the Ukraine.  The subsequent invitation to Putin to visit the White house in the fall – probably just before the November elections – has resulted in further uncertainty especially after Putin’s statement that he proposed to Trump holding a referendum to resolve the eastern Ukraine issue.  So, what is really going on here?

Quite frankly, we have all been scratching our heads as the behaviour in some respects is reminiscent of 18^th and 19^th century monarchs gathering to decide the fate of wide swaths of the world in private meetings.  Putin is an autocrat and Trump is a business autocrat who admires political autocrats, so their personal level diplomacy may indeed be a series of moves designed to remake the world and return it to an age when Russian and American led blocs were the only game in town. Both the Russians and the Americans have seen their political influence decline in a multilateral world led by growing Asia-Pacific economies and both countries have been less than comfortable with the rise of China.

Military Spending in the G7: A Quick Post NATO Summit Comparison

Well, the Disruptor-in-Chief, US President Donald Trump is at it again.  At today’s NATO summit he demanded that the members of NATO need to quickly increase their defence spending not only to meet the committed target of 2 percent of GDP but to also double their commitments to 4 percent of GDP.  Needless to say, all of this presented an opportunity to try and take a look at some of the numbers to see where things actually stand and to put the numbers into some kind of longer term perspective.

So, I have put together data on military spending, GDP and central government expenditure for the G-7 countries.  For Canada, I have data from Historical Statistics of Canada, the Urquhart and Statistics Canada GDP numbers and the Federal Fiscal Reference Tables.  For the other countries, the numbers for 1950 to 2000 are taken from the Correlates of War Data Project while those from 2001 to 2017 are from the World Bank database.  Note that for Germany, it is military spending for both East and West Germany from 1955 to 1989 and GDP also is combined for both countries for the 1955 to 1989 period. Why only the G-7 and not all of NATO? Well, time is money and as I do not have much of either I have opted for a truncated comparison.

Grain Transshipment at the Lakehead: A Canada Day Celebration

“Two towns stand on the shores of the Lake less than a mile apart.  What Lloyd’s is to shipping, or the College of Surgeons to medicine, that they are to the Wheat.”

Rudyard Kipling, Letters of Travel

Just in time for July 1st, there was a short ceremony and plaque unveiling today at the Western Grain By-Products Elevator Site on Kingston Street in Thunder Bay held by the Historic Sites and Monuments Board of Canada and Parks Canada. The elevator is the former Fort William Elevator No. 10 which was built in 1913 at the peak of the Canadian wheat boom. The plaque is the outcome of a long period of lobbying and work by the Friends of Grain Elevators (check out the site for some spectacular overhead shots) and commemorates the role of the grain elevators and the grain shipping industry at the Lakehead twin cities of Fort William and Port Arthur in facilitating Canada’s role as a leader in the international grain trade.

Public Debt: A Global Perspective

There is much international preoccupation with debt at the public sector, household and corporate levels and the upward creep in interest rates does apparently keep central bankers - including our own Mr. Poloz - awake at night.  Given the problem is an international one, sometimes it is useful to try and get a global perspective on the numbers.  One report from a relatively new  outfit known as the Institute of International Finance (IIF) recently pegged the total amount of global debt at $237 trillion (USD) or well over 300 percent of the world's annual economic output. According to one of their slides, in 2017 financial sector debt was $59 trillion, household debt $45 trillion, government debt $64 trillion and non-financial corporate debt $70 trillion.  This would make global public debt about 27 percent of the global debt total in 2017 and household debt about 19 percent with the remaining 54 percent from the corporate and financial sectors.

Addressing Ontario's Fiscal Challenges

While 2017-18 saw a surplus of $642 million after years of deficits, the 2018-19 Ontario budget now projects a deficit of $6.7 billion and a net provincial debt of $325 billion with deficits projected to continue for five years afterwards.  If one considers the recent report of the Auditor-General, then Ontario’s deficit may be even larger at $11.7 billion.  Furthermore, the Ontario government has committed to spending more on public infrastructure and as a result can be expected to add at least another $156 billion to its net debt bringing it near $500 billion dollars by 2026-27.  This will add substantially to provincial government debt charges even if interest rates remain at historic lows.  There are a number of measures that Ontario’s provincial government could adopt in an effort to address the sustainability of the public finances over the medium-term.  I recently put out one of the Ontario 360 policy papers run through University of Toronto School of Public Policy and Governance in which I outlined the long-term evolution of Ontario’s fiscal situation as well as outlined some recommendations for change.  Here is a quick summary of the five-point strategy.

Natural Resources, Living Standards and Inequality

Kevin Milligan had an op-ed in the Globe and Mail a few days ago drawing the link between natural resource development, middle class incomes and inequality.  The point essentially was: “Without income derived from the resource boom, Canadian inequality and the well-being of the Canadian middle class would be much worse than we’ve experienced.”  The point was being made with reference to the current pipeline debate and the consequences of erecting barriers to the transportation of resources to market.  Erecting barriers in the end would result in less resource development and by extension fewer good jobs that would diminish “the income source that has best shielded the Canadian middle class from the harsh economic forces that are increasing inequality in other countries. For Canadians concerned with inequality, the equalizing effect of resource development on our economy is too strong to ignore.”

Another Picture That Will Define Ontario Politics for the Next Four Years

Ontario is getting a Throne Speech this week and a budget next week and these events will set the stage for the June election.  In her recent post, Frances drew attention to the province's public finances via the public sector wage bill and the public-private sector wage differential and that cutting the public sector wage bill may certainly be an option pursued in the future.   This is because the province has accumulated a large public debt that given the prospects for an economic slowdown and/or rising interest rates will potentially increase fiscal pressure via debt service costs which in 2016-17 totaled  $11.7 billion or just over 8 percent of total government spending.  That is more than what is being spent to fund the provinces post-secondary education and training system (The Ministry of Advanced Education and Skills Development) which came in at $10.1 billion.

The Balance of the Federation: Canada 1870 to 2016

My contribution to Maclean’s 2018 Chartapalooza was a plot of the federal government’s share of total government expenditure in Canada since 1870.  The chart showed that until World War I, with the exception of period marked by the building of the federally subsidized CPR, the federal share of total government spending in Canada was approximately 40 percent. After the peak of over 70 percent reached during World War I, the federal share came down quickly but went up again during the Depression era and soared during World War II reaching over 90 percent. The federal share of spending came down more gradually after World War II—leveling off at almost 50 percent during the 1970s and 1980s before falling once again to about 40 percent during the 1990s.

However, this chart can be improved upon in two ways.  First, it would be useful to include not only the federal government but also provincial and local government expenditure shares over the period 1870 to the present.  As well, if one is going to include federal, provincial and local governments, it would be useful to take transfers to lower tiers into account and look at spending shares net of those transfers.  So, this is what I attempt to do in the accompanying chart  where I present federal, provincial and local expenditure shares net of transfers – at least for the period since 1933.

Donald Trump is a Mercantilist

A lot of ink is being spilled on Donald Trump and his America First approach to trade negotiations which has generated considerable trepidation and angst in both Ottawa and Mexico City as NAFTA appears headed for termination. Donald Trump is obsessed with the concept of trade deficits – which the United States does have on an overall basis. If one is to take President Trump at his word, he believes that if the United States sold more to the rest of the world than it imported from them, the country’s economy and manufacturing sector would be better off.

He appears to feel that the trade deficit is bad for the economy even though the evidence over time demonstrates that US GDP has grown at the same time that its trade deficit has grown. True, some sectors have done better than others and manufacturing employment has suffered but overall, per capita GDP and total output in the United States has grown in an environment of free trade – or reciprocity – if one feels like using a nineteenth century term. In the end, there seems to be an absence of evidence based decision making going on here but that does not mean Donald Trump is not making decisions based on some type of economic theory. It clearly seems to me that Donald Trump is simply a Mercantilist.

The Long Restructuring of Ontario's Health Spending

Ontario’s hospital sector has made a submission to the provincial finance committee making the case that overcrowding has become so serious that there is a need for more funding.  They are seeking a 4.55 percent increase in operating funds for the 2018-19 fiscal year in their pre budget submission.  According to numbers calculated from data from the Canadian Institute for Health Information(CIHI), over the period 2010 to 2017, the average annual growth of nominal provincial government hospital spending in Ontario has been 1.9 percent while provincial government health spending as a whole has averaged 2.6 percent.

Part of what is going on here is the usual maneuvering for more funds as part of any budgetary process which this year is expected to be a bit more active given that Ontario is apparently out of the deficit woods and balancing its books.  This should provide fuel for any number of claims across the province that there is a crisis and more funding is needed. The provincial government health care sector has seen its nominal spending growth since 2010 restrained to just over 2 percent annually (compared to about 7 percent annually between 1997 and 2009) as part of the Ontario government’s attempt to slay its deficit.  However, a look at the longer-term numbers also suggests that the hospital sector in Ontario has borne a disproportionate share of spending restraint over the last few decades.

So What Happens in the Next Recession?

I’m not a macro economist by any stretch of the imagination and yet I cannot help wondering what is going to happen in terms of policy response the next time Canada goes into a downturn.  It is not a question of whether there will be another recession, only when. By policy response, I am of course wondering about the traditional tools used to affect aggregate demand such as fiscal and monetary policy.