FOR IMMEDIATE RELEASE:
[La version française suit le texte anglais.]
FAO PROJECTS HEALTH SECTOR SPENDING SHORTFALL
OF $61.9 BILLION OVER NINE YEARS
TORONTO, May 10, 2021 - Today, the Financial Accountability Office of Ontario (FAO) released its review of the Ministry of Health’s spending plan from the 2021 Ontario Budget and the 2021-22 Expenditure Estimates.
The FAO’s report provides a financial overview of the ministry and examines key financial issues, including the health sector spending plan in the 2021 budget, the elective surgery and non-emergent diagnostic procedure backlog, the hospital capacity outlook and federal health transfers in support of provincial health sector spending.
The FAO reviewed the Province’s health sector programs and policy commitments and concluded that the 2021 budget’s base health sector spending plan, which excludes time-limited spending related to the COVID-19 pandemic, has a $3.7 billion shortfall in 2023-24, rising to $12.4 billion in 2029-30. Over the entire nine-year period from 2021-22 to 2029-30, the cumulative shortfall is $61.9 billion. This means that if the Province intends to meet its health sector spending targets, then new spending restraint measures will need to be introduced.
In response to record and growing hospitalization rates in the third wave of the pandemic, on April 20, 2021, hospitals were directed to immediately cease all elective surgeries and non-emergent diagnostic procedures. This postponement of elective surgeries and diagnostic procedures is expected to increase the surgical backlog by 11,152 procedures per week and the diagnostic backlog by 51,990 procedures per week. Overall, the FAO projects that the elective surgery backlog will reach 419,200 procedures and the diagnostic backlog will reach nearly 2.5 million procedures by the end of September 2021.
The FAO estimates that it will cost the Province $1.3 billion to clear the projected surgery and diagnostic procedures backlog. In the 2021 budget, the Province allocated $610 million to address the backlog which represents a funding shortfall of approximately $700 million.
The FAO estimates that it will take 3.5 years to clear the surgery backlog and over three years to clear the diagnostic procedure backlog, assuming hospitals operate at 11 per cent above pre-pandemic volumes for all surgeries and 18 per cent above pre-pandemic volumes for non-emergent diagnostic procedures. Importantly, the FAO has not reviewed the ministry’s plan to clear the surgical and diagnostic procedure backlog in terms of staffing levels, the required physical capacity in hospitals (e.g., operating room space) and other operating constraints. These factors will all impact the estimated cost and time to clear the backlog.
To learn more, read the full report here.
- The Province’s base health sector spending plan in the 2021 budget calls for real per capita spending to decline by an annual average of 0.5 per cent from 2019-20 to 2029-30.
- The projected shortfall over the first three years of the Province’s spending plan is not distributed evenly among health sector program areas.
- The FAO estimates that the largest spending gaps are in hospitals, Ontario public drug programs and community programs.
- The FAO projects long-term care homes spending will grow at an average annual rate of 13.8 per cent over the next three years, which reflects the Province’s on-going commitment to create 30,000 new and redeveloped long-term care beds and increase daily direct care for long-term care residents to four hours per day.
- The FAO estimates that from 2020-21 to 2022-23, the Province’s health sector spending plan includes a total of $16.0 billion for time-limited COVID-19-related measures.
- In response to the COVID-19 pandemic, the Province added 2,259 temporary beds in 2019-20, 4,510 beds in 2020-21 and 3,522 in 2021-22, non-cumulatively.
- The FAO expects that the surge beds will be withdrawn after 2021-22 and, based on a review of the 10-year hospital infrastructure plan, that the Province will add an average of 324 hospital beds annually, reaching 37,321 beds by 2029-30.
- By 2029, the FAO estimates that the number of hospital beds will be 2.3 per 1,000 Ontarians, up from 2.2 per 1,000 in 2017.
- Compared to other OECD countries, this represents one of the lowest number of hospital beds as a share of the population and is below the Canadian average.
- The federal government supports a portion of provincial health sector spending, largely through the Canada Health Transfer (CHT).
- Since 2011-12, federal health transfers as a share of Ontario base health sector spending have increased from 21.2 per cent to 25.2 per cent in 2019-20, as the annual growth rate of the CHT has significantly outpaced the growth rate of Ontario’s health sector spending.
- The Province, through the Council of the Federation, has requested that 35 per cent of all annual provincial health spending be supported by federal health transfers.
- The FAO estimates that, in 2021-22, an additional $7.1 billion in CHT funding would be required to meet the 35 per cent target specifically for Ontario, which would grow to $9.5 billion in 2029-30.
About the FAO
Established by the Financial Accountability Officer Act, 2013, the Financial Accountability Office (FAO) provides independent analysis on the state of the Province’s finances, trends in the provincial economy and related matters important to the Legislative Assembly of Ontario. Visit our website at http://www.fao-on.org/en/ and follow us on Twitter at https://twitter.com/InfoFAO.