Medicare Cost Drivers during the 2004-2014 Health Accord Period in Canada: What Is the Evidence?

As per the Canada Health Act, hospital and physician services (Medicare) are covered by the public sector. With the 2004 First Minister's Health Accord showcasing a 10-Year Plan to strengthen healthcare in Canada, significant investments have been made to improve access to these services. The average annual growth rate (AAGR) of spending between 2004 and 2014 was 5.1% for hospitals and 6.6% for physicians. The key policy question is whether or not these increases were just used to boost unit cost? An accounting approach was used to address this issue. Results suggest that for hospitals, wage per hour for staff (excluding physicians) accounted for 49% of the AAGR for hospitals (2.5 percentage points [pp]), while fee increases accounted for 47% of the AAGR for physician spending (3.1 pp). However, considering that general inflation was on average 1.8% per year, the health premium for physicians represented almost twice that for hospital staff.