Canadians increasingly understand the costs an aging population will thrust on us all. Simply put, Canada, like all industrial nations, is facing a future fiscal squeeze born of slower growth in revenues coupled with pressure on government spending (especially health care and retirement income programs).
The challenge for Canadians is to muster the confidence to tackle these issues now instead of waiting until a crisis strikes. In particular, Canada will have to solve the challenge of our health care system if we are to tackle the larger problem of the coming demographic fiscal crunch.
How high will be the costs imposed on Canadian society by an aging population?
Noted economist Christopher Ragan has calculated that, on current spending trends and tax rates, the public sector deficit generated by aging would reach a little over four per cent of the Gross Domestic Product in 2040, a figure over and above any deficits governments might run for other reasons.
If we were running a deficit of that size today, it would be $67 billion.
The challenges facing our health care system are well known. Canada spends a lot but doesn’t get a lot. Our health care spending is some 11.4 per cent of GDP; that ranks us sixth amongst the industrialized countries with universal health care.
Yet Canada ranks poorly on many key measures, such as access to doctors and medical technologies such as MRIs. We also fare poorly on wait times for medically necessary surgeries and procedures compared to other industrial countries.
Thus, contrary to a widespread misconception, health care in Canada is not “underfunded,” but is rather “underperforming.”
The problem is daunting. Canadians, however, have supported difficult reforms in the recent past (such as balancing the budget and fixing the Canada Pension Plan in the 90s) when political leaders have made a strong and reasoned case for them.
The contentious and often emotional nature of debate regarding heath care means reform has so far eluded us. The hard reality, however, is that we cannot manage the costs of an aging population without fundamentally reforming - and improving - Canadian health care.
The Macdonald-Laurier Institute recently published five essays by leading Canadian thinkers on how best to deal with the looming demographic deficit. Three of the five essays included focused discussions and recommendations on health care spending.
For example, Professor Janice MacKinnon, finance minister under NDP Premier Roy Romanow when Saskatchewan wrestled so successfully with deficits and over-spending in the early 1990s, offered a bold look at needed reforms from her unique perspective.
MacKinnon, as always, didn’t pull any punches: “the problem cannot be addressed without fundamentally changing our health care system and its funding.” She suggests diverting services away from traditional hospitals, which in her words are “expensive, heavily unionized, and therefore difficult to manage efficiently.”
She believes services delivered by private clinics, focusing on specialty care, can deliver better services at a lower cost.
She also wants patients diverted from expensive and crowded emergency rooms and other costly facilities to primary health clinics where family doctors — on salary rather than fee-for-service — would work as part of a team including physiotherapists, counselors, nutritionists and others.
Public-private partnerships should be used to build more long-term care facilities so that elderly patients can be cared for in less expensive purpose-built facilities.
MacKinnon’s bluntness in identifying the problem and offering pragmatic, proven solutions provides a model for how Canadians and their governments can and should be debating health care reform today.
Also on the agenda in our series was the way we pay for health care.
A consensus emerged that the old system, where most Canadians pay nothing out of pocket for publicly-insured health care services, would have to change.
A range of possible reforms were suggested. Two contributors suggested making health care services a taxable benefit. Another suggestion was to allow patient co-payments for medical services. All of the contributors agreed, however, that any reform needed to ensure accessibility for low-income households.
There is nothing mysterious about the arithmetic of an aging society. We will soon have fewer workers supporting more retired people who consume lots of public services, including health care.
Left unreformed, our system will produce declining health care quality, rising costs, and battered public finances.
Wishful thinking will not resolve these challenges. Practical solutions that improve service quality and control costs are clearly available.
But Canadians and their leaders must choose them, before less desirable choices choose us during the inevitable crisis that drift and inaction will, in due course, produce.
Brian Lee Crowley and Jason Clemens are the editors of the Macdonald-Laurier Institute’s recent publication Canada’s Looming Fiscal Squeeze: Collected Essays on Solutions; available at www.macdonaldlaurier.ca