March 2017 HEALTH FUNDING EXPLAINED 2 www.bcauditor.com CONTENTS 623 Fort Street Victoria, British Columbia Auditor General’s comments 3 Canada V8W 1G1 P: 250.419.6100 F: 250.387.1230 Report highlights 5 www.bcauditor.com Health Funding Explained 2 6 The Honourable Linda Reid The scope of our work 6 Speaker of the Legislative Assembly Total provincial revenues: 2015/16 7 Province of British Columbia Provincial health expenses 10 Parliament Buildings Ministry of Health revenue 15 Victoria, British Columbia Government’s budget V8V 1X4 allocation process 20 Health authority funding Dear Madame Speaker: allocation process 24 Medical Services Plan 25 I have the honour to transmit to the Speaker of the Legislative PharmaCare 29 Assembly of British Columbia the report Health Funding Health service delivery agencies 31 Explained 2. Expenses by major program area 37 Providence Health Care 43 Tangible capital asset financing 45 Tangible capital asset expenditures 50 Carol Bellringer, FCPA, FCA Auditor General Appendix A: PHSA health agencies 52 Victoria, B.C. Appendix B: Population distribution March 2017 by health authority 53 Appendix C: Major capital projects 64 AUDITOR GENERAL’S COMMENTS Information on health care costs is in high demand, but not readily accessible. In this report, we pulled it all together for easier viewing and increased understanding. This is an update to our 2013 report on health spending in the province. The Ministry of Health spends $17.4 billion The population of B.C. over the same period of annually, or 37% of overall provincial expenses. time is projected to increase by 6%. In our 2015 This is three times more than the next largest report Monitoring Fiscal Sustainability, we noted ministry (Education). The Ministry of Health that increased health care costs may threaten B.C.’s disburses $11.8 billion to the six health ability to provide services and meet financial authorities, which in turn, deliver care to the commitments – both now and in the future. people of B.C. The Medical Services Plan receives $4.2 billion and those funds are disbursed to A significant portion of our province’s health care physicians throughout the province. And $1.2 funding comes from the Canada Health Transfer, billion goes to PharmaCare for prescription which is money the federal government sends to drugs. B.C. spends an average of $4,050 per the provinces and territories to help pay for health person annually. This is close to the Canadian care. Last year, the transfer for all of Canada was average, which is $4,095. $34 billion, and B.C. received $4.5 billion. On March 31, 2017 – just two weeks after the release Carol Bellringer, FCPA, FCA Over the five years between 2013 and 2018, of this report – how the transfer works is going to Auditor General health spending is projected to increase by $2.7 change. Since 2004, the transfer has grown by 6% billion or 15%. This is more than the combined a year, and it will drop to 3% (or GDP growth – 2015/16 budget for the 11 smallest ministries, or whichever is higher) starting in April. the budget for the third largest ministry (Social Development and Social Innovation). Auditor General of British Columbia | March 2017 | Health Funding Explained 2 3 AUDITOR GENERAL’S COMMENTS As a result of the drop, the provinces and territories have argued that this will lower the amount of federal support for health care down from 23% to 20%. Given the financial and social importance of providing health care, we will continue to look at health spending by producing information reports such as this, as well as conducting performance audits of various aspects of the health care system. I would like to thank the staff at the Ministry of Health and health authorities for their assistance in helping us complete this project. Carol Bellringer, FCPA, FCA Auditor General Victoria, B.C. March 2017 Auditor General of British Columbia | March 2017 | Health Funding Explained 2 4 REPORT HIGHLIGHTS The The health sector Ministry of Health INCREASED SPENDS SPENDS SPENDING $19.2B $17.4B SINCE 2012/13 annually, annually, RISING or or HEALTH CARE COSTS POSE RISKS to B.C.’s ability to % % Community care: provide services of the4 total1 of 3the total7 UP 14% and meet financial provincial budget provincial budget commitments Acute care: UP 11% PHYSICIANS: B.C. SPENDS DECREASED $ $4.2B 4,050 SPENDING Residential care: /PERSON PRESCRIPTION SINCE 2012/13 UP 5% DRUGS: on health care $1.2B Public health CANADIAN HEALTH CARE and wellness Mental health and DELIVERY: average is substance use services: $11.8B $ 4,095 % % /PERSON DOWN 1 UP 3 Auditor General of British Columbia | March 2017 | Health Funding Explained 2 5 HEALTH FUNDING EXPLAINED 2 The Ministry of Health is the steward of British Columbia’s health care system. It sets the limited to significant programs and services (e.g., direction, funds most aspects of the system and monitors results. Many other organizations, such as programs and services that receive significant health authorities and hospital societies, also ensure the people of British Columbia receive high-quality funding or that significantly impact B.C.’s health health care. With so many organizations, getting a clear picture of how the system works can care system). Many of the numbers we include be challenging. are approximate. In this information report, we present the major THE SCOPE OF components of B.C.’s health care system in a series Health funding and spending of graphs, charts and summary explanations. Our OUR WORK overview in B.C., 2015/16 goal is to show how the system is funded and This project is not a traditional audit. We Our report shows: where the dollars are spent. compiled information from the Ministry of the major funding sources for the B.C. Health, the province’s six health authorities and This is an update to our previously released publicly funded health system other organizations in the health system. Our report Health Funding Explained, and we include involvement was limited to enquiry, analysis how those dollars flow to service delivery financial information from 2012/13 to 2015/16. and discussion. We did not audit or review the the overall provincial financial picture for Where possible, we provide government’s future information we present. the health sector estimates of revenues and expenses to show how funding flows from central where health care revenue and expense trends are We conducted this project under Section 13 of the government to the health service delivery heading over the next two years. Auditor General Act. The scope of our work was agencies (see Exhibit 2) key revenues and expenses, with graphs DID YOU KNOW? and diagrams to show financial trends In 2015/16, the Government of British Columbia reported $47.6 billion in revenues. In 2015/16, government spent $19.2 billion in the health sector. Auditor General of British Columbia | March 2017 | Health Funding Explained 2 6 HEALTH FUNDING EXPLAINED 2 TOTAL PROVINCIAL Miscellaneous and other: This includes revenue from the sale of properties, natural REVENUES: 2015/16 resources, net income from government In 2015/16, the provincial government received business enterprises (e.g., BC Hydro approximately $47.6 billion in revenue from and BC Lottery Corporation), and the funding sources listed below (also see investment income. Exhibit 1). Government uses these revenues to A significant portion of health sector funding provide services to the people of B.C. The major comes from the Canada Health Transfer categories include: (2015/16 - $4.5 billion), with additional Taxation: The province charges tax on contributions from the federal government, as personal and corporate income, goods and well as MSP premiums (2015/16 - $2.4 billion) services, and other commodities. Taxation included with fees and licenses. is the largest source of provincial revenue. Federal transfers: The majority of The provincial government distributes funding transfers come from the Canada Health for health care through the Ministry of Health Transfer and the Canada Social Transfer, (ministry), and the amount is approved by as legislated in the Federal-Provincial Fiscal Members of the Legislative Assembly. We Arrangements Act. The transfers support describe the government budgeting process in provincial health and social services. more detail on page 20. Fees and licenses income: This is revenue generated from Medical Services Plan (MSP) payments, fees for licenses (e.g., drivers’ licenses), and liquor licenses. Auditor General of British Columbia | March 2017 | Health Funding Explained 2 7 HEALTH FUNDING EXPLAINED 2 Exhibit 1: Total provincial revenue (2015/16) Total Provincial Revenue $ $24.3B 7.7B $ Taxation Federal 5.8B government Fees & licenses $2.6B $3.3B $2.7B $1.2B Self-supported Other sources Income from Investments income natural resources (Crown corporations & agencies) Source: Office of the Auditor General of British Columbia, based on the B.C. Public Accounts Auditor General of British Columbia | March 2017 | Health Funding Explained 2 8 HEALTH FUNDING EXPLAINED 2 Exhibit 2: Funding through the provincial health system (2015/16) Provincial $17.4B $1.2B Government PharmaCare (Taxes, fees and other sources) Health Sector Ministry Regional Health of Health services authorities YOU $19.2B $11.8B Federal Government Ministry of Social Medical Physicans (Canada Health Development and Services Plan Transfer) $1.8B Social Innovation $4.2B and Ministry of Children and Family Development The provincial government spends, on average $4,050 per person Source: Office of the Auditor General of British Columbia, based on information from the B.C. Public Accounts Auditor General of British Columbia | March 2017 | Health Funding Explained 2 9 HEALTH FUNDING EXPLAINED 2 PROVINCIAL Exhibit 3: Provincial expenses, by program HEALTH EXPENSES In 2015/16, B.C.’s health sector expenses were $19.2 billion or 41% of total provincial expenses.