Agingmore3

What’s Driving Up the Costs of Healthcare?

One of the most pressing challenges to the sustainability of the healthcare system is that on average, Canadians are utilizing more healthcare services. The evidence shows that health expenditures per person at any given age have been increasing, driven in large part by technological change (Stabile & Greenblatt, 2010) that have increased the use of tests, treatments, and drugs per capita. A recent study focused on the effect of aging on the cost of the British Columbia prescription drug plan (Morgan 2006). The calculations showed that between 1996 and 2002 the per capita costs of the plan increased at an average annual rate of 10.8%. Aging increased annual costs by 1.0%. Ninety percent of the increase in drug costs to the province was driven by changes in which drugs and how many drugs were prescribed.

Too often, however, new treatments are used without sufficient evidence that they are superior to older treatments.1 Take for example prescription drug consumption. One study showed patients with high blood pressure have been prescribed expensive, newer, brand-name drugs instead of older generic medication, despite scientific evidence that older, cheaper high blood pressure medication was sometimes more effective. Vioxx, a drug used to treat arthritis but was withdrawn from the market because it caused cardiac deaths, was frequently prescribed for arthritis even though it was 50 times more expensive than the older, safer medications (Morgan, 2006). The total number of drugs prescribed is increasing too―a study by Morgan (2005) showed that 71% of the annual growth rate of drug expenditures in Canada between 1998 and 2004 was due to increased volume, and the number of prescriptions filled per year has risen from an average of 7.8 to 12 from 1995 to 2005 (CIHI, 2010). All told, spending on prescription drugs has more than tripled as a share of GDP over the past 2 decades; annual per capita drug costs have increased by about 10.8% per year between 1996 and 2002 alone, due mainly to increased prescribing and of prescribing expensive brand-name drugs over less costly generic versions, not population aging.

1 For more on the health and cost problems associated with technology change, see the More Not Always Better topic.