Many people recognize how Canada’s aging population is going to take an ever-increasing toll on medicare budgets, but few people realize how dramatic it is going to be. A new study shines a clear, harsh light on the issue.
This week Roy Romanow is presenting his commission’s report on health care to the federal cabinet, and I sincerely hope he addresses the economic reality that David Baxter of Urban Futures Inc. has researched.
For one, I hope Romanow takes seriously the proposals put forward by Baxter’s related non-profit group, the Urban Futures Institute (UFI) of Vancouver.
This is a demographics and statistical think-tank that recently published its suggestions on how to preserve the five pillars of the Canada Health Act: portability, sustainability, accessibility, universal access, comprehensiveness and public administration.
I know. There are six “pillars” on my list. Do you have any idea which one is not considered a pillar of the Canada Health Act?
If your answer is “sustainability” you are right. For some reason, the folks who concocted the pillars did not think it important enough to include the sustainable part, and it is starting to show.
The UFI has latched onto this fact, and provides some frightening analysis in a new report (available at www. urbanfutures.com). Its detailed look at health costs as they relate to age reveal that even if our government’s average health-care outlay per person’s lifetime stops rising, the overall cost per person for the foreseeable future will continue to rise because of Canada’s aging population. If costs continue to rise per lifetime, as they have in the past, the situation is bleaker. And if the working population does not pay its fair share through taxation – or some other means – before they reach old age, the situation will be dire.
Here are the report’s basic facts: Taking the real per capita age-adjusted health-care costs into account – which is a complex way of saying that if only the aging of the population is taken into account and not the rapidly increasing costs of health-care provision – then our government’s yearly per capita health expenditures will increase from $2,017 today to $4,867 in 2050 – not including inflation. This is an almost unavoidable increase.
If we then project that the real (not counting inflation) costs of health care will continue to increase at current rates, then our government’s yearly health expenditures will rise to $7,930 per man, woman and child by 2050, according to the report. That’s a scary number. If we paid our fair share, my family would have to incur a yearly health insurance bill of $32,000, before drug costs, dental expenses and other things not covered by Medicare.
The underlying problem, the report argues, is that there is no process in our system to encourage efficiency, and there is no way for users to gauge the costs they are incurring.
These are potent arguments and any medicare remedy that fails to take economic and demographic factors into account misses the inevitable collision that is heading our way. In most businesses, production costs decrease over time. This does not apply to the business of health care, which can never be “adequate” for everyone’s needs.
So how are we going to cope?
Raising taxes to pay for health care, the use of privatization and increased immigration are not going to adequately address the underlying sickness here.
Taxes become uncollectible if they are too high. The United States, that bastion of privatization, spends more per capita on health than any other country in the world. And aging is a worldwide trend. So where’s the remedy?
I have many ideas, but one solution put forward by the UFI is that we lock current health-procedure costs to inflation and force all health-care providers to extract efficiencies out of the system. The authors don’t provide specifics on how this might apply to real-world, complex situations in hospitals, for example, but the idea is worth consideration.
The institute also recommends that every citizen actually pay the real cost of his or her lifelong health-care usage through insurance premiums which reflect the actual average costs of the average lifetime so that people know how much everyone is using the system. Divided into yearly allotments and depending on various factors, the premium could cost between $2,400 and $3,000/year if implemented today, when a fund to cover future hikes could still be established.
The basic argument in the institute’s report – which is a great read, but the details are too complex to delve into here – is that former Saskatchewan premier Tommy Douglas’s original health-insurance plan envisioned similar measures to ensure sustainability. In fact, a capped health budget that would cut into fees if exceeded was one of the big factors that lead to a massive Saskatchewan doctors strike in 1962.
Naturally, the UFI also suggests that the poorest people could receive tax credits or financial assistance towards paying health premiums. If implemented today, the UFI plan would cost a two-person household more than $5,000 per year in health premiums.
And that high cost is exactly why there is urgency on this issue.
As time progresses, solutions with vision are losing their viability. The longer we wait, the more crisis management will be the issue instead of sound planning.
Today, we must funnel the earnings of the baby-boom generation towards the health care they will demand when they start retiring en masse.
That is the main point of the UFI conclusion, and Romanow would be foolish to ignore it.
I have some common-sense approaches of my own that Romanow could implement too.
We need improvements in epidemiology, to help us find out why the incidence of such expensive diseases as Parkinson’s are increasing.
We need to fund doctors’ education differently, so those who take our publicly funded education south of the border, making money on the backs of Canadian taxpayers’ generous educational provisions, will pay a price.
We need to give tax credits for routine, preventative doctor visits.
And more than anything, we need a medicare system that has room for a deductible, so that people start to take responsibility for their own health, and the neediest ones won’t bankrupt themselves.
