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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 aging population threatens the f inancial sustainability of its healthcare system. And there’s no denying that Canada’s population is getting older — in f act, the proportion of the population aged 65 and older will almost double during the next 20 years. T he assumption is based on several key f acts: healthcare costs increase with age; an aging population increases demand f or (potentially expensive) health services such as long-term care; income tends to decline as people get older, reducing the relative amount of available revenue f rom income tax; and f inally f rom the simple f act that we are not making as many babies as we used to. T he number of children being born per 1,000 people dropped f rom 28 during the baby boom years to 11.2 in 2010. And f ewer being born means f ewer workers available to pay the income tax older Canadians rely on to meet healthcare costs. 1 Percent Annual Cost Increase Still, will an aging population break the health system’s bank? T he answer may surprise you. Research indicates that aging does not pose a major threat to the f inancial sustainability of Canada’s healthcare system. In f act, recent projections estimate population aging will increase healthcare costs in Canada by about one per cent annually f rom 2010 to 2036. How could this be? In part, it’s a question of numbers. T he aged are still only a relatively small part of the Canadian population: in 2006 only 13 percent of Canadians were 65 years or older. If this 13 percent had increased 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 signif icant, it is somewhat of f set by revenues the government receives. Seniors pay taxes on their pensions and on withdrawals of RRSPs. At the same time, as the overall population ages, some costs that government covers should f all slightly. T here will be f ewer people going to school and a reduced need f or workers compensation. Of course, if Canada increases immigration and/or extends the retirement age, that, in turn will af f ect how f ast the population as a whole ages and will provide increased tax revenues f rom a larger working population. How much do healthcare costs increase as we get older? In 2009, provincial and territorial governments spent an average of $18,906 per year on Canadians aged 80 and older, compared to $2,398 on those between 15 and 65. But the relationship between these numbers has always been true. We have always been paying more f or the healthcare costs of older people. It is only the increase in their numbers that we need to worry about. And that, as we have shown, is relatively small.

Is there a danger that we are underestimating the impact of the ef f ects of an aging population? No. T he aging of the population is not something new; the Canadian population has been aging f or the past 40 years, providing good evidence on how much the trend has so f ar af f ected healthcare costs and which we can use to extrapolate the f uture. In f act, there are other costs that are driving the increase in healthcare spending at least as much as the aging population. Canadians are using more services — many of them only marginally ef f ective — more of ten. We are getting more tests, more treatments, and more drugs, some of which may have a positive inf luence on health while others do very little but increase costs. A recent study on cost increases in the British Columbia prescription drug plan showed that 90 percent of the increase in provincial drug costs was driven by changes in the choice of drug and how many drugs were prescribed — only 10 percent of the increase could be explained by an aging population. T hese are the issues that healthcare prof essionals and the public who pays f or the system need to concentrate on. A silver tsunami does not threaten the sustainability of the Canadian healthcare system. It increases costs, yes, but not by so much that it will overwhelm what Canadians can af f ord or what they are likely to be willing to pay f or. Noralou Roos is Professor, Faculty of Medicine at the University of Manitoba and the co-founder of Nicholas Hirst is CEO of Original Pictures Inc.

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