$20 Billion More Invested in Healthcare Over 6 Years: Are We Getting Services Worth the Cost?
Friday, April 25, 2025
Michel Girard
Quebec’s public health and social services network (the “Réseau”) is extremely expensive. Are we receiving services that match the enormous sums being invested? The answer is uncertain. Based on the annual evolution of services delivered in the fiscal year ending March 31, 2024 (the most recent statistics available) compared to March 31, 2019, the Réseau has barely improved over these five years under Premier François Legault’s government. In some respects, it has even deteriorated6.
Rising Expenditures
The Legault government has not been stingy with spending. In 2023-24, it injected a massive $61.7 billion into the Réseau, $18.5 billion more than in 2018-19 under the previous Liberal government. This allowed for the hiring of nearly 45,000 additional staff, plus 468 more general practitioners and 788 more medical specialists. These new hires caused payroll costs to jump by $9.24 billion, eating up half of the extra $18.5 billion invested since 2018-196.
But Less Access
What is the outcome after these additional investments? After five years, there are now 131 establishments-11 fewer than before. The number of physical facilities managed by the network has dropped by 58 to 1,551. Hospital beds have fallen by 1,221 to 19,918. Long-term care (CHSLD) spots have barely increased, up just 269 to 44,608.
The number of hospital inpatient days dropped by 260,000 to 4.13 million. Emergency room visits declined by 90,000 to 3.62 million. In mental health, hospitalization days fell by 87,846 to 809,362. Worse, in 2023-24, doctors performed about 506,198 surgeries-30,056 fewer than in 2018-19.
For people with intellectual disabilities or autism spectrum disorder, the number of days paid for intermediate resources fell to 44.4 days per user in 2023-24, compared to 52.3 days in 2018-19.
All these decreases occurred while demand for medical services was rising and complaints about lack of access persisted6.
Exceptions
Thankfully, some services did see increased use thanks to the extra $18.5 billion invested in 2023-24 compared to 2018-19. With 1,256 more doctors, the number of medical consultations reached 6.3 million, up by 190,000.
The biggest gains were in home support for seniors, people with physical or intellectual disabilities, and those with autism spectrum disorder. The number of hours of home support services increased by 18 million, with 97.5 hours per user in 2023-24 versus 54.5 hours in 2018-196.
Spending Continues to Soar
In the most recent fiscal year (2024-25), health and social services spending climbed again to $63.5 billion, $1.75 billion more than in 2023-24. The funding sources for this $63.5 billion are as follows, with increases since 2018-19 in parentheses:
Taxes and government revenues: $32.95B (+$11.7B)
Federal transfers: $12.9B (+$3.75B)
Health services fund contributions: $10.83B (+$3.1B)
User contributions: $4.47B (+$1.11B)
Other sources: $1.59B (+$425M)
Other ministries and agencies: $740M (+$169M)
That’s $20 billion more invested collectively in the network over six years6.
And Quebec plans to inject another $2 billion in 2025-26, even as it has asked its new Santé Québec agency to cut $1.5 billion without affecting services to the public16.
* * *
Yesterday's editorial cartoon from Le Devoir:
Classifying types of patients may not be the best idea...
But the Girard piece did bring out how elastic the demand for medical attention
might be.
* * *
To each country its problems. I finally got access to ChatGPT4.o, the best model
for a reseach problem. On the heels of Ignatieff's contention that Canada is lagging
on advances in GPD per worker, I have been trying to get an estimate on how much
having private financing for healthcare might be boosting American GDP figures.
Below:
Could you estimate for me the percentage of the US GDP attributable to the fact that
medical services are run through private Insurance companies. I am in Canada where this is not the case.
Estimated Share of US GDP due to Private Health Insurance
1. Direct Financing via Private Insurers
Total US GDP (2022): ~$25.5 trillion
Total National Health Expenditure (NHE): ~$4.6 trillion (~18% of GDP)
Private Health Insurance Premiums: ~$1.3 trillion (~5.1% of GDP)
This 5.1% represents all provider payments routed through private plans.
2. Administrative & Profit “Overhead”
US private insurers’ non-medical costs (admin, underwriting, brokers, profits): ~12–15% of
premiums
Single-payer (e.g., Medicare, Canada’s public plan) admin: ~1–2% of spending
Excess overhead vs. single-payer: ~10 percentage points
Calculation:
Excess overhead ≈ 10% × \$1.3 trillion ≃ \$130 billion
As a % of US GDP: \$130 billion ÷ $25.5 trillion ≃ 0.5%
3. Range & Sensitivity
Depending on data sources, estimates of excess administrative/profit costs range from
8–12% of private-plan premiums. That implies:
Low‐end: 8% × 1.3 T = \104 B ⇒ ~0.4% of GDP
High‐end: 12% × 1.3T=1.3T=156 B ⇒ ~0.6% of GDP
4. Summary Table
Metric Amount ($ B) % of GDP
Private insurance premiums 1,300 5.1%
Excess admin & profit costs vs. single-payer 130 (± 26) 0.5% (± 0.1%)
Key Takeaways
~5% of US GDP flows through private health insurers as premiums.
Of that, ~0.4–0.6% of GDP represents the extra administrative and profit costs* incurred by
private plans compared to a public single-payer model.
How does private insurance affect healthcare costs?
Private insurance affects healthcare costs through several key mechanisms:
1. Administrative Overhead
Detailed: Private insurers incur non-medical costs—for underwriting, marketing, billing, broker
commissions and profits—averaging 12–15% of premiums. In contrast, Medicare’s
administrative rate is ~2–4% and single-payer systems (e.g., Canada) run ~1–2%.
Impact: Higher overhead inflates overall system spending, diverting resources from direct
patient care.
2. Price Negotiation & Market Fragmentation
Detailed: Multiple payers negotiate rates separately with hospitals and physicians. This
fragmentation weakens purchaser leverage, leading to higher negotiated prices compared to a large single buyer.
Impact: Providers may set list prices higher, anticipating discounts, which drives up baseline
costs for all payers.
3. Cost-Sharing & Utilization
Detailed: Deductibles, copays and coinsurance influence patient behavior. High cost-sharing can suppress necessary and unnecessary care alike, whereas low cost-sharing can encourage overuse (moral hazard).
Impact: Striking the right balance is complex, and misaligned incentives can either leave people
undertreated or drive up unnecessary service use.
4. Provider Billing Practices & Cost-Shifting
Detailed: Hospitals and doctors often charge private insurers more to compensate for lower
public reimbursements (Medicaid/Medicare) and unpaid care for the uninsured.
Impact: This “cost-shifting” raises private-plan rates and further increases systemwide costs.
5. Risk Selection & Pooling
Detailed: Insurers design benefit designs and pricing to attract healthier enrollees and deter
sicker ones (adverse selection). Managing risk pools requires reserves and risk-adjustment
mechanisms, adding complexity and expense.
Impact: Inefficiencies in pooling drive premiums up for high-risk patients and may leave some
underinsured or uninsured.
Comparison of Administrative Costs
Payer Type Admin Cost (% of Spending)
Private Insurance 12–15%
Medicare 2–4%
Medicaid 6–8%
Single-Payer Systems* 1–2%
*e.g., Canada’s public plan
Summary of Key Points
Higher overhead in private plans diverts funds from care.
Fragmented negotiations inflate provider prices.
Cost-sharing design affects utilization and patient outcomes.
Cost-shifting and risk selection introduce further inefficiencies.
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