Commission on the Reform of Ontario's Public Services

The Ontario Health Insurance Plan (OHIP) is the next biggest item in health spending —
$11.9 billion in 2010–11. It is subject to the same population and inflation drivers as hospitals;
in this case, the inflation driver is the cost of paying doctors. An additional driver, which we
might call “utilization above population growth,” is expected to add 3.0 per cent annually to
costs. This reflects the fact that, over time, there has been an increase in the use of health
care. New technology permits more interventions (hip and knee replacements, for example)
and more tests become possible. Such developments improve the population’s well-being, but
they also add new costs to the system. (Health care may be the only area in which
technological advances increase costs, rather than reduce them.) So any projection of future
costs must go beyond estimating how much today’s practices will cost in the future. There will
doubtless be an expanding array of health care services that become feasible and that
physicians and patients will want to use. The Status Quo Scenario for OHIP sees an average
of 6.4 per cent growth per year that would lift spending to $18.4 billion in 2017–18.
The cost of the ministry’s drug benefit programs would rise by 4.3 per cent per year in the
Status Quo Scenario from $3.5 billion in 2010–11 to $4.6 billion in 2017–18. One cost driver,
the growing population of those aged 65 or older, will raise costs by 3.5 per cent per year; the
other driver, new drugs and technology, will add 1.5 per cent annually. These are simply
examples of how cost drivers work in the biggest programs that make up the health care
budget. Every program in the health care budget has its own drivers that may be stronger
or weaker than the average.
Education spending, at $21.9 billion, accounted for almost 20 per cent of program spending in
2010–11, a sum that would grow to $29.1 billion in 2017–18 if the Status Quo is maintained.
This is based on average annual increases of 5.3 per cent to 2013–14 and further 3.3 per cent
average annual increases to 2017–18. Almost all of that goes to funding elementary and
secondary schools. Collective bargaining agreements for the province’s teachers expire in
August 2012, and the cost drivers reflect that. The current arrangements show up prominently
in the higher short-term growth. The five years from 2013–14 through 2017–18 inclusive are
not covered by existing collective agreements. For the purposes of this report, inflationary
growth is the key cost driver for the five years. The education budget also features the
implementation of full-day kindergarten, which in the Status Quo Scenario will rapidly drive
costs higher as it is rolled out between now and September 2014, when it is scheduled to be
fully in place.
98