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Aging population only small part of the problem

A version of this commentary appeared in the National Post, the Huffington Post and the Winnipeg Free Press

Grignon_aging hands_000016042077_SmallThe tsunami metaphor is more and more often used in commentaries about the effect of aging on health care spending in Canada. It musters up images of devastation and irresistible strength submersing any levees the system might try to mount to oppose it. It is a powerful but misleading metaphor.

There is a worrying rise in health care spending in Canada, but it doesn’t have much to do with population aging. To stay with the oceanographic metaphor, aging might be, at most, a modest tidal wave. The real tsunami of health spending is the result of changes in the way all patients are treated in the system, resulting from both price inflation (drugs and doctors cost more than ever) and technical progress (new diagnostic tests, surgeries and drugs).

The yearly increases in total health care spending in Canada  approximately 10 billion dollars per year nowadays  does not result from aging per se, but the costs of treatment, including diagnostic tests, drugs and doctors, for all patients, young and old. It’s not that we have too many seniors that will break the bank, but how those seniors, and others, are treated in the health system that affects the bottom line.

Put another way, aging on its own adds around two billion dollars to the annual health care bill while changes in the cost of treatment per average patient adds eight billion dollars.

How is it possible? To answer, let’s take a closer look at the age profile of health care spending: if age is on the horizontal axis and average spending per individual of a given age on the vertical axis, the profile resembles a valley. In other words, it costs a lot to be born, because it happens most often in a hospital; then, each year of age between one and 50 does not cost the health system much on average (the profile is flat and low)  but costs start picking up again at age 50 and the slope becomes steeper with age until plateauing around 80.

Contemplating such an age profile (drawn to illustrate a single year, say 2013), one might conclude that aging will increase spending dramatically. However, looking at two such annual profiles (one for 1993 and one for 2013), it is easy to see that the really striking change has been at the ground level: we spend much more today on anyone at any age than twenty years ago, and this is what really drives our health care costs.

This increase in costs for patient care has not been sudden, but has taken place over several decades and will likely continue apace. Costs have been driven by current investments in research and development (in industry and academia alike), insurance coverage for expensive, cutting edge treatments  whether truly beneficial or not  and our demand for longer and better quality lives.

We can’t really do anything about costs resulting from our aging population, but we can make choices about what services we provide patients of all ages. These choices might mean rationing care (and, as a result, longevity and quality of life) but also, and preferably, making sure all patients receive essential care, but not unnecessary care. The latter is about reducing “waste” in our health system, interventions that have not been proven to enhance length or quality of life.

So, how do we distinguish necessary from unnecessary care?

We need to build our health system on evidence; we need to know how many years of life and how much quality of life we buy through the increased volume of services and the flow of new technologies in the health care system. We also need to pay for services and innovation on the basis of what they add to quality and quantity of life (outcome-based payments). Instead we continue paying for technology on the basis of how much it costs to develop, not how much it delivers.

It’s time we stop throwing ever more money after the latest and greatest technologies in health services without knowing if we are getting a return on our investment. Our health care system suffers in the process.

Michel Grignon is an expert advisor with EvidenceNetwork.ca, an associate professor with the departments of Economics and Health, Aging & Society at McMaster University and Director of the Centre for Health Economics and Policy Analysis (CHEPA).

October 2013