Canada’s health-care system fails to account for senior migration

Migrating seniors pay most of their lifetime taxes in one province and then consume most of their health care in another

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Canada’s health-care system fails to account for senior migration

571 words, with tag

ByAshley Stedman
and Jason Clemens
The Fraser Institute

The recent meeting of G7 health ministers should provide a wake-up call for policy-makers about Canada’s ailing health-care system.

Compared to many of our G7 counterparts, Canada’s system is fraught with problems, including comparatively high costs and long wait times.

One largely overlooked problem is how Canada’s financing of public health care fails to account for interprovincial migration of seniors. Provinces such as Quebec benefit (through lower health-care costs) when seniors leave the province, while provinces that attract seniors, such as British Columbia, incur increased costs.

The underlying cause of this cost – or benefit – from seniors migration is that taxation (used to pay for public health care) and the consumption of health care follow two patterns.

People pay very little tax until they begin working, with their contributions typically peaking during their top earning years. Not surprisingly, earnings decline when people retire. Almost three-quarters (73.4 per cent) of Canada’s total tax burden is paid by the working-age population (24 to 64).

Health care, on the other hand, follows almost the exact opposite pattern. Canadians consume quite a bit of health care in their first year of life, then health consumption drops markedly until about the mid-50s. The majority of health-care consumption typically takes place after the age of 65. The average annual government spending on health care on people between the ages of one and 59 is $2,188. This almost triples, to $6,424, for Canadians aged 65 to 69. The average per-person spending for those over 70 is $13,797.

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Consequently, when seniors migrate between provinces, they’re highly likely to have paid most of their lifetime taxes in one province while consuming most of their lifetime health care in another.

In a recent study, the migration patterns of Canadian seniors and health-care spending from 1980 to 2016 were analyzed. British Columbia had a net gain of 40,512 seniors and Quebec lost 37,305 seniors over this 36-year period.

The estimated cost to B.C. for health-care expenditures related to these seniors was $7.2 billion. Quebec likely saved about $6.0 billion during the same period from seniors leaving the province. Saskatchewan ($534 million), Manitoba ($288 million), and Newfoundland and Labrador ($8 million) also recorded net savings from seniors leaving. The remaining provinces all incurred additional health-care costs from migrating seniors.

These costs or savings are mitigated by the taxes paid by migrating seniors. The study estimates that up to 36 per cent of the cost to B.C. could have been offset by taxes and up to 19 per cent of the savings to Quebec could have been reduced.

The problem isn’t that seniors are migrating between provinces. But seniors moving from province to province reveals an embedded problem within government health-care financing.

All government health-care financing in Canada is on a pay-as-you-go basis – there’s no pre-funding of expenses. Annual tax revenues are used to finance health-care in the same year. So there’s a mismatch between the prime earning years of most Canadians and the years they’re most likely to consume health-care services.

The migration of seniors is just one problem with Canadian health care. Introducing a stop-gap solution to this issue would miss the larger need for broad reform of our health-care system. And that reform should be based on successful alternatives used in other countries with universal care.

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Ashley Stedman and Jason Clemens are analysts at the Fraser Institute and co-authors of The Impact of Interprovincial Migration of Seniors on Provincial Health Care Spending.

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