January 9, 2015 – Prince Edward Island faces a $13 billion fiscal burden – the future tax bill for increased healthcare costs over the next half-century – and should prepare now for the coming demographic squeeze, says a report today from the C.D. Howe Institute. In “Managing the Cost of Healthcare for an Aging Population: Prince Edward Island’s $13 Billion Healthcare Squeeze,” authors William B.P. Robson, Colin Busby and Aaron Jacobs find that demographically sensitive spending threatens large increases in the province’s tax burden over time.
“Prince Edward Island’s looming liability amounts to $16 billion, of which $13 billion – more than 80 percent – relates to healthcare,” remarked Busby. “In other words, to cover the additional 50-year cost of these programs without raising tax rates, the province would need some $16 billion in assets yielding income at the same rate as Canadian long-term bonds do. The required amount is more than 2.6 times the provincial GDP, or about $106,000 per Islander – a major squeeze indeed.”
According to Robson: “One way to mitigate the impact of rising costs in some healthcare services would be to follow the lead of the late-1990s reforms to the Canada Pension Plan, which converted it from pay-as-you-go – with no assets to match its liabilities – to a scheme in which part of the premium people pay today prefunds their own future needs.”
Recommendations to improve the sustainability of Prince Edward Island’s healthcare system include:
- Incorporate team-based primary care models where patients can get comprehensive non-major services from an organized group of healthcare professionals;
- Improve follow-up care for patients after they leave hospital;
- Let less expensive medical providers, such as nurse practitioners, deliver simple services that are currently performed by more expensive doctors; and
- Establish of electronic health records.
The authors conclude that “selective prefunding and benchmarking against other provinces that allocate their healthcare budgets differently are two steps that could help Prince Edward Island deliver high-quality healthcare in a sustainable fiscal framework, and mitigate the province’s looming demographic squeeze.”
Click here for the full report.
The C.D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies. It is Canada’s trusted source of essential policy intelligence, distinguished by research that is nonpartisan, evidence-based and subject to definitive expert review. It is considered by many to be Canada’s most influential think tank.
For more information contact: William B.P. Robson, President and CEO, and Colin Busby, Senior Policy Analyst, C.D. Howe Institute, at 416-865-1904; E-mail: amcbrien@cdhowe.org.