Budget 2025: What It Means for Healthcare

Sector Impact Summary

Healthcare remains the single largest expenditure category in Alberta's provincial budget. Budget 2025 allocates $24,037 million in total expense to the Ministry of Health, an increase of $342 million (1.4%) from the 2024-25 third quarter forecast. Health operating expense stands at $22,096 million, up $122 million from the prior year. When the Mental Health and Addiction ministry is included, total health-related spending approaches $26 billion.

The defining feature of this budget is not additional money but structural change. The government is continuing its refocusing of the health care system through the establishment of four integrated provincial health agencies: Recovery Alberta (operational since September 2024), Primary Care Alberta (operational February 2025), Acute Care Alberta (launched February 2025), and Assisted Living Alberta (launching April 1, 2025). These agencies will be coordinated through an Integration Council and advised by a new Indigenous Advisory Council representing First Nations, Metis, and Inuit communities.

In the broader fiscal context, the health budget grows at an average of 3.6% per year through 2027-28, which trails the combined rate of population growth (2.5%) and inflation (2.6%). This means the system will need to absorb demand growth partly through efficiency gains rather than new dollars alone. The $5.2 billion provincial deficit adds further pressure, signaling that health spending increases will be disciplined even as demand accelerates.

Key Budget Measures

Health System Restructuring

The four new agencies replace the previous Alberta Health Services structure with specialized bodies focused on distinct segments of the health care continuum. Acute Care Alberta, with an operating budget of $4,639 million (up $160 million from 2024-25), oversees hospitals, urgent care centres, chartered surgical facilities, emergency health services, and cancer care. Primary Care Alberta receives $322 million to build a modern, unified primary care system anchored by provider teams that include family physicians, nurse practitioners, and pharmacists. Total primary care operating expense, including programs outside the new agency, reaches $644 million in 2025-26.

Physician Compensation and Development

Physician compensation and development is budgeted at $6,990 million in 2025-26, a modest $29 million decrease from the 2024-25 forecast. However, this line grows rapidly to $8,119 million by 2027-28, a 16% increase over two years. The budget includes $15 million for recruitment and retention in underserved areas, a $12 million increase for the Rural Remote Northern Program, and $12 million annually for physician support programs. Negotiations with the Alberta Medical Association on the market rate review remain ongoing and could push costs beyond current projections.

Mental Health and Addiction

The Ministry of Mental Health and Addiction receives $1,792 million in total expense for 2025-26, $193 million above the prior year. Operating expense is $1,663 million, rising to $1,742 million by 2027-28. The budget provides $148 million to continue developing recovery communities, with 11 communities approved (including five in Indigenous communities). Three of these, totalling 200 beds, have been completed in Red Deer, Lethbridge, and Gunn.

The Compassionate Intervention Act, to be introduced in spring 2025, will create a legal framework for mandated treatment of individuals whose problematic substance use places them or others at risk of harm. This legislation will have significant implications for both health and justice system capacity.

Drugs and Supplemental Health Benefits

Funding for drugs and supplemental health benefits totals $1,873 million, including $863 million for the Seniors Drug program supporting over 700,000 seniors. This envelope grows to $2,059 million by 2027-28.

Emergency Medical Services

EMS operating expense rises to $764 million, up $56 million (7.9%) from 2024-25. The capital plan provides $60 million over three years for the EMS Vehicles Capital Program.

Indigenous Health

A three-year allocation of $45 million funds Indigenous health initiatives prioritizing patient care and frontline staff serving rural, remote, and First Nations, Metis, and Inuit communities. The new Indigenous Advisory Council will advise on culturally safe care delivery across all four health agencies.

Health Information Technology

Health IT spending increases $92 million to $908 million, reflecting the digital infrastructure demands of the system restructuring and ongoing modernization of electronic health records and clinical information systems.

Funding Changes

Category	2024-25 Forecast	2025-26 Estimate	Change
Health Total Expense	$23,695M	$24,037M	+$342M (+1.4%)
Health Operating Expense	$21,974M	$22,096M	+$122M (+0.6%)
Acute Care Operating	$4,479M	$4,639M	+$160M (+3.6%)
Physician Compensation	$7,019M	$6,990M	-$29M (-0.4%)
Inventory Consumption	$1,408M	$1,608M	+$200M (+14.2%)
EMS	$708M	$764M	+$56M (+7.9%)
Health IT	$816M	$908M	+$92M (+11.3%)

Source: Fiscal Plan 2025-28, Expense, pp. 71-74.

The operating expense increase of 0.6% is notably modest. The more significant movement is in inventory consumption (up $200 million, reflecting pharmaceuticals and medical supplies) and health IT (up $92 million). The mental health and addiction portfolio adds another $64 million in operating expense on top of the health figures shown above.

Capital Investment

The three-year capital plan for health is substantial, totalling $3,600 million across the health, mental health, and continuing care envelopes combined (as referenced in the Fiscal Plan overview). Key projects through the Ministry of Health capital plan ($1,456 million over three years) and the Ministry of Infrastructure health facilities budget include:

• Red Deer Regional Hospital Centre Redevelopment: $557 million over three years, the largest single health capital project in the plan
• Health Facilities Capital Maintenance and Renewal: $486 million over three years
• Alberta Surgical Initiative Capital Program: $261 million (via Infrastructure) plus $4 million (via Health)
• Medical Device Reprocessing Upgrades: $243 million over three years
• Beaverlodge Health Centre Replacement: $189 million over three years
• Diagnostic Imaging Enhancement Program: $168 million ($56 million per year)
• Medical Equipment Replacement and Upgrade: $90 million over three years
• La Crete Maternity and Community Health Centre: $80 million (via Infrastructure)
• Gene Zwozdesky Centre at Norwood (Edmonton): $81 million (via Infrastructure)
• Bridgeland Riverside Continuing Care Centre (Calgary): $64 million (via Infrastructure)
• EMS Vehicles Capital Program: $60 million over three years
• Recovery Communities: $148 million across Mental Health and Addiction and Infrastructure

Additionally, health sector self-financed capital spending is projected at $770 million over three years.

Source: Capital Plan Details by Ministry 2025-28.

Risks

Health System Restructuring Execution Risk (High). The simultaneous creation of four new provincial health agencies represents the most significant organizational change in Alberta health care since the creation of Alberta Health Services in 2008. During the transition period, there is material risk of service disruption, loss of institutional knowledge, staff uncertainty, and coordination gaps between the new entities. The Integration Council is designed to mitigate this, but the scale of change is formidable.

Population Growth Driving Demand (High). Alberta's population continues to grow at 2.5%, pushing past the 5 million mark. This creates rising demand for health services across the continuum, particularly for the elderly population, which consumes the largest share of health resources. The budget's operating expense growth of 0.6% does not keep pace with this demand trajectory.

Physician Compensation Cost Escalation (High). The projection for physician compensation to reach $8,119 million by 2027-28 represents a 16% increase. The outcome of ongoing Alberta Medical Association negotiations on the market rate review could push costs further, creating fiscal risk. At the same time, under-investing in physician compensation jeopardizes recruitment and retention in a competitive national market.

Federal Health Funding Uncertainty (Medium). The Working Together Shared Health Priorities agreement with the federal government expires in 2025-26. Alberta anticipates renewal, but confirmation has not been received, creating a funding risk for programs dependent on federal transfers.

Tariff Impacts on Supply Costs (Medium). U.S. tariffs of 15% on goods (10% on energy) could increase costs for imported medical equipment, pharmaceuticals, and supplies, adding inflationary pressure on health spending.

Opportunities

Health System Integration. If executed well, the four specialized agencies have the potential to reduce fragmentation, improve care coordination, and drive efficiencies that the single-entity AHS model struggled to achieve. Specialization could allow each agency to focus on its core mandate with greater accountability.

Primary Care Transformation. Primary Care Alberta represents a meaningful investment in the foundation of the health system. The emphasis on provider teams (family physicians, nurse practitioners, pharmacists) and $20 million for nurse practitioners could improve access, particularly for the estimated one million Albertans without a family doctor.

Diagnostic Imaging Expansion. The $168 million Diagnostic Imaging Enhancement Program is a targeted investment that can reduce wait times, improve early detection, and alleviate downstream pressure on acute care.

Indigenous Health Equity. The $45 million investment and the establishment of the Indigenous Advisory Council represent an institutional commitment to addressing health disparities in Indigenous communities.

What's Missing

The budget does not include funding for a provincial pharmacare program, nor does it address the growing call for universal dental care beyond federal programs. There is no specific allocation for health workforce planning to address registered nurse and other allied health professional shortages beyond physician programs. The budget provides no additional capital for new hospital construction beyond the Red Deer and Beaverlodge projects, despite population growth in Calgary and Edmonton metro areas. Wait time reduction targets are not attached to specific budget measures, making it difficult to assess whether investments will achieve measurable improvements. Finally, the Compassionate Intervention Act will require treatment capacity that may exceed what the current 11 recovery communities can provide, and additional costs for mandated treatment are not clearly itemized.

Net Assessment

Healthcare in Budget 2025 is defined more by structural transformation than fiscal expansion. The $24 billion envelope is large in absolute terms, but the 1.4% increase in total expense and 0.6% increase in operating expense represent the tightest growth rate in years, set against a backdrop of rapid population growth, aging demographics, and rising system complexity.

The restructuring into four agencies is a bold bet on specialization and integration. If successful, it could yield meaningful improvements in care delivery and system efficiency. If poorly executed, it risks destabilizing a system already under strain. The $3.6 billion capital plan demonstrates long-term commitment, with the Red Deer hospital redevelopment, diagnostic imaging expansion, and surgical initiative as signature investments.

The mental health and addiction portfolio continues to expand with $1.8 billion in total expense and 11 recovery communities. The Compassionate Intervention Act will be closely watched for its implications on civil liberties, treatment capacity, and justice system workload.

Overall, this is a budget that asks the health system to do more with modestly more resources, banking on organizational reform to close the gap between funding and demand. The rating is mixed: strong on capital, strong on structural ambition, but tight on the operating dollars needed to sustain services during a period of unprecedented population growth.