CALGARY, Oct. 17, 2012 /CNW/ - In a report released today by The School of Public Policy, authors Herb Emery, David Still and Tom Cottrell show that even with modest increases in health spending due to population aging, Canadian Medicare under the current pay-as-you-go funding model is unsustainable.
This model sees government allocate current tax revenues to cover current health costs, with nothing put aside for projected rising health-care costs arising from the aging baby boom generation. The authors calculate that these implicit liabilities for pay-as-you-go Medicare effectively double the level of indebtedness of the provincial and territorial governments.
It's not the size of the health-care liabilities that is the only problem. Who will pay for them is the bigger issue. "The pay-as-you-go model has become like a Ponzi scheme, where those who got in early enough make out nicely, while those who arrive late stand to suffer a serious financial blow if they agree to pay the taxes required to pay for Medicare," the authors argue.
The authors quantify the effective doubling of lifetime taxes paid for the same levels of health-care services between boomers and grandchildren of the boomers. Given the tax increases and pension benefit reductions the baby boomers have imposed on younger generations of Canadians, boomers are counting on "do as I say, not as I do" policy to ensure that they will have access to necessary medical services. To sustain Medicare, the federal and provincial governments will need to shift the burden of paying for baby boomer health-care bills off of the bank accounts of their children and grandchildren.
One option that the authors identify is a pre-funding model where people are charged today for future health-care liabilities. Unfortunately, the window has already closed on this option, as the authors contend that future liabilities have already become too great and it is too late to collect sufficient taxes from baby boomers now aged 45 to 65.
The only way to sustain Medicare at this point is for governments to focus on health promotion and reforms to health service provision that will reduce overall health-care costs. Examples include encouraging home care for the elderly and palliative care; reducing the prevalence and severity of chronic disease in the population; and changing how chronic diseases are managed to reduce reliance on doctors and hospitals.
It was ten years ago that they were proposed by the Romanow Commission, the Kirby Commission and the "Mazankowski Report". The failure to act on the recommendations of these commissions intended to ensure the sustainability of publicly funded health care in Canada may have been the biggest mistake the baby boomers have made to date that will cost them dearly in their "Golden Years".
The report can be found at www.policyschool.ucalgary.ca/publications
SOURCE: The School of Public Policy - University of Calgary
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