Working Papers

Changing Healthcare Capital-To-Labor Ratios: Evidence and Implications for Bending the Cost Curve in Canada and Beyond

Eric Nauenberg

Healthcare capital-to-labor ratios are examined for the 10 provincial single-payer health care plans across Canada. The data show an increasing trend-particularly during the period 1997-2009 during which the ratio as much as doubled from 3% to 6%. Multivariate analyses indicate that every percentage point uptick in the rate of increase in this ratio is associated with an uptick in the rate of increase of real per capita provincial government healthcare expenditures by approximately $31 (p < 0.01). While the magnitude of this relationship is not large, it is still substantial enough to warrant notice: every percentage point decrease in the upward trend of the capital-to-labor ratio might be associated with a one percentage point decrease in the upward trend of per capita government healthcare expenditures. An uptick since 1997 in the rate of increase in per capita prescription drug expenditures is also associated with a decline in the trend of increasing per capita healthcare costs. While there has been some recent evidence of a slowing in the rate of health care expenditure increase, it is still unclear whether this reflects just a pause, after which the rate of increase will return to its baseline level, or a long-term shift; therefore, it is important to continue to explore various policy avenues to affect the rate of change going forward.

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Paper Keywords

expenditures, trends, labor, capital, drugs