Silver tsunami to break the health system’s bank?
A version of this commentary appeared in The Huffington Post, Windsor Star and the Epoch Times
We hear over and over again that Canada’s agingpopulation threatens the financial sustainability of itshealthcare system. And there’s no denying that Canada’spopulation is getting older — in fact, the proportion of thepopulation aged 65 and older will almost double during thenext 20 years.The assumption is based on several key facts: healthcarecosts increase with age; an aging population increasesdemand for (potentially expensive) health services such aslong-term care; income tends to decline as people getolder, reducing the relative amount of available revenuefrom income tax; and finally from the simple fact that weare not making as many babies as we used to.The number of children being born per 1,000 people dropped from 28 during the baby boom years to 11.2 in2010. And fewer being born means fewer workers available to pay the income tax older Canadians rely on tomeet healthcare costs.
1 Percent Annual Cost Increase
Still, will an aging population break the health system’s bank? The answer may surprise you.Research indicates that aging does
pose a major threat to the financial sustainability of Canada’shealthcare system. In fact, recent projections estimate population aging will increase healthcare costs inCanada by about one per cent annually from 2010 to 2036.How could this be? In part, it’s a question of numbers. The aged are still only a relatively small part of theCanadian population: in 2006 only 13 percent of Canadians were 65 years or older. If this 13 percent hadincreased by 2 percent that year, that would translate into a very small 0.3 percent increase in the number of elderly relative to the total number of Canadians using health services. Although the resulting 1 percent increase in healthcare costs is still significant, it issomewhat offset byrevenues the government receives. Seniors pay taxes on their pensions and on withdrawals of RRSPs. Atthe same time, as the overall population ages, some costs that government covers should fall slightly. Therewill be fewer people going to school and a reduced need for workers compensation.Of course, if Canada increases immigration and/or extends the retirement age, that, in turn will affect howfast the population as a whole ages and will provide increased tax revenues from a larger workingpopulation.How much do healthcare costs increase as we get older? In 2009, provincial and territorial governmentsspent an average of $18,906 per year on Canadians aged 80 and older, compared to $2,398 on thosebetween 15 and 65. But the relationship between these numbers has always been true. We have always beenpaying more for the healthcare costs of older people. It is only the increase in their numbers that we need toworry about. And that, as we have shown, is relatively small.